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CREDIT AGREEMENT
Dated as of September 6, 2002
among
ALBAHEALTH, LLC
as Borrower,
THE OTHER CREDIT PARTIES SIGNATORY HERETO,
as Credit Parties,
THE LENDERS SIGNATORY HERETO
FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
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TABLE OF CONTENTS
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1. AMOUNT AND TERMS OF CREDIT..........................................................................2
1.1 Credit Facilities..............................................................................2
1.2 Letters of Credit..............................................................................4
1.3 Prepayments....................................................................................4
1.4 Use of Proceeds................................................................................6
1.5 Interest and Applicable Margins................................................................6
1.6 Eligible Accounts..............................................................................9
1.7 Eligible Inventory............................................................................12
1.8 Cash Management Systems.......................................................................13
1.9 Fees..........................................................................................13
1.10 Receipt of Payments...........................................................................14
1.11 Application and Allocation of Payments........................................................14
1.12 Loan Account and Accounting...................................................................15
1.13 Indemnity.....................................................................................15
1.14 Access........................................................................................17
1.15 Taxes.........................................................................................17
1.16 Capital Adequacy; Increased Costs; Illegality.................................................19
1.17 Single Loan...................................................................................20
2. CONDITIONS PRECEDENT...............................................................................20
2.1 Conditions to the Initial Loans...............................................................20
2.2 Further Conditions to Each Loan...............................................................22
3. REPRESENTATIONS AND WARRANTIES.....................................................................23
3.1 Corporate Existence; Compliance with Law......................................................23
3.2 Executive Offices, Collateral Locations, FEIN.................................................24
3.3 Corporate Power, Authorization, Enforceable Obligations.......................................24
3.4 Financial Statements and Projections..........................................................24
3.5 Material Adverse Effect.......................................................................26
3.6 Ownership of Property; Liens..................................................................26
3.7 Labor Matters.................................................................................27
3.8 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.....................27
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3.9 Government Regulation.........................................................................27
3.10 Margin Regulations............................................................................28
3.11 Taxes.........................................................................................28
3.12 ERISA.........................................................................................29
3.13 No Litigation.................................................................................29
3.14 Brokers.......................................................................................30
3.15 Intellectual Property.........................................................................30
3.16 Full Disclosure...............................................................................30
3.17 Environmental Matters.........................................................................30
3.18 Insurance.....................................................................................31
3.19 Deposit and Disbursement Accounts.............................................................31
3.20 Government Contracts..........................................................................31
3.21 Customer and Trade Relations..................................................................32
3.22 Agreements and Other Documents................................................................32
3.23 Solvency......................................................................................32
3.24 Contribution Documents........................................................................32
4. FINANCIAL STATEMENTS AND INFORMATION...............................................................33
4.1 Reports and Notices...........................................................................33
4.2 Communication with Accountants................................................................33
5. AFFIRMATIVE COVENANTS..............................................................................34
5.1 Maintenance of Existence and Conduct of Business..............................................34
5.2 Payment of Charges............................................................................34
5.3 Books and Records.............................................................................34
5.4 Insurance; Damage to or Destruction of Collateral.............................................35
5.5 Compliance with Laws..........................................................................37
5.6 Supplemental Disclosure.......................................................................37
5.7 Intellectual Property.........................................................................37
5.8 Environmental Matters.........................................................................37
5.9 Landlords' Agreements, Mortgagee Agreements, Bailee Letters and Real
Estate Purchases..............................................................................38
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5.10 Employment of Accountant......................................................................39
5.11 ERISA.........................................................................................39
5.12 Further Assurances............................................................................39
6. NEGATIVE COVENANTS.................................................................................39
6.1 Mergers, Subsidiaries, Etc....................................................................39
6.2 Investments; Loans and Advances...............................................................40
6.3 Indebtedness..................................................................................40
6.4 Employee Loans and Affiliate Transactions.....................................................41
6.5 Capital Structure and Business................................................................41
6.6 Guaranteed Indebtedness.......................................................................42
6.7 Liens.........................................................................................42
6.8 Sale of Stock and Assets......................................................................42
6.9 ERISA.........................................................................................43
6.10 Financial Covenants...........................................................................43
6.11 Hazardous Materials...........................................................................43
6.12 Sale-Leasebacks...............................................................................43
6.13 Cancellation of Indebtedness..................................................................43
6.14 Restricted Payments...........................................................................43
6.15 Change of Corporate Name or Location; Change of Fiscal Year...................................44
6.16 No Impairment of Intercompany Transfers.......................................................44
6.17 No Speculative Transactions...................................................................44
6.18 Leases; Real Estate Purchases.................................................................44
6.19 Changes Relating to Material Contracts........................................................45
7. TERM...............................................................................................45
7.1 Termination...................................................................................45
7.2 Survival of Obligations Upon Termination of Financing Arrangements............................45
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES.............................................................45
8.1 Events of Default.............................................................................45
8.2 Remedies......................................................................................48
8.3 Waivers by Credit Parties.....................................................................48
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9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT.................................................49
9.1 Assignment and Participations.................................................................49
9.2 Appointment of Agent..........................................................................51
9.3 Agent's Reliance, Etc.........................................................................52
9.4 GE Capital and Affiliates.....................................................................52
9.5 Lender Credit Decision........................................................................53
9.6 Indemnification...............................................................................53
9.7 Successor Agent...............................................................................53
9.8 Setoff and Sharing of Payments................................................................54
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert......................55
10. SUCCESSORS AND ASSIGNS..............................................................................57
10.1 Successors and Assigns........................................................................57
11. MISCELLANEOUS.......................................................................................57
11.1 Complete Agreement; Modification of Agreement.................................................57
11.2 Amendments and Waivers........................................................................58
11.3 Fees and Expenses.............................................................................60
11.4 No Waiver.....................................................................................61
11.5 Remedies......................................................................................62
11.6 Severability..................................................................................62
11.7 Conflict of Terms.............................................................................62
11.8 Confidentiality...............................................................................62
11.9 GOVERNING LAW.................................................................................62
11.10 Notices.......................................................................................63
11.11 Section Titles................................................................................64
11.12 Counterparts..................................................................................64
11.13 WAIVER OF JURY TRIAL..........................................................................64
11.14 Press Releases and Related Matters............................................................64
11.15 Reinstatement.................................................................................65
11.16 Advice of Counsel.............................................................................65
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11.17 No Strict Construction........................................................................65
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INDEX OF APPENDICES
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Annex A (Recitals) - Definitions
Annex B (SECTION 1.2) - Letters of Credit
Annex C (SECTION 1.8) - Cash Management System
Annex D (SECTION 2.1(A)) - Closing Checklist
Annex E (SECTION 4.1(A)) - Financial Statements and Projections -- Reporting
Annex F (SECTION 4.1(B)) - Collateral Reports
Annex G (SECTION 6.10) - Financial Covenants
Annex H (SECTION 9.9(A)) - Lenders' Wire Transfer Information
Annex I (SECTION 11.10) - Notice Addresses
Annex J (from Annex A-
Commitments definition) - Commitments as of Closing Date
Exhibit 1.1(a)(i) - Form of Notice of Revolving Credit Advance
Exhibit 1.1(a)(ii) - Form of Revolving Note
Exhibit 1.1(b) - Form of Term Note
Exhibit 1.5(e) - Form of Notice of Conversion/Continuation
Exhibit 4.1(b) - Form of Borrowing Base Certificate
Exhibit 9.1(a) - Form of Assignment Agreement
Schedule 1.1 - Agent's Representatives
Disclosure Schedule 1.4 - Sources and Uses; Funds Flow Memorandum
Disclosure Schedule 3.1 - Type of Entity; State of Organization
Disclosure Schedule 3.2 - Executive Offices, Collateral Locations, FEIN
Disclosure Schedule 3.4(A) - Financial Statements
Disclosure Schedule 3.4(B) - Pro Forma
Disclosure Schedule 3.4(C) - Projections
Disclosure Schedule 3.6 - Real Estate and Leases
Disclosure Schedule 3.7 - Labor Matters
Disclosure Schedule 3.8 - Ventures, Subsidiaries and Affiliates; Outstanding Stock
Disclosure Schedule 3.11 - Tax Matters
Disclosure Schedule 3.12 - ERISA Plans
Disclosure Schedule 3.13 - Litigation
Disclosure Schedule 3.15 - Intellectual Property
Disclosure Schedule 3.17 - Hazardous Materials
Disclosure Schedule 3.18 - Insurance
Disclosure Schedule 3.19 - Deposit and Disbursement Accounts
Disclosure Schedule 3.20 - Government Contracts
Disclosure Schedule 3.22 - Material Agreements
Disclosure Schedule 5.1 - Trade Names
Disclosure Schedule 6.3 - Indebtedness
Disclosure Schedule 6.4(a) - Transactions with Affiliates
Disclosure Schedule 6.7 - Existing Liens
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This CREDIT AGREEMENT as the same may be amended, supplemented, restated or
otherwise modified from time to time, (this "Agreement"), dated as of September
6, 2002 among ALBAHEALTH, LLC, a Delaware limited liability company
("BORROWER"); the other Credit Parties signatory hereto; GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation (in its individual capacity, "GE
CAPITAL"), for itself, as Lender, and as Agent for Lenders, and the other
Lenders signatory hereto from time to time.
RECITALS
WHEREAS, Borrower has requested that Lenders extend revolving credit
facilities to Borrower of up to Three Million Dollars ($3,000,000) and term
credit facilities to Borrower of up to Fifteen Million Dollars ($15,000,000) in
the aggregate for the purpose of refinancing certain indebtedness of Borrower
and to provide (a) working capital financing for Borrower, (b) funds for other
working capital and capital expenditure purposes of Borrower and (c) funds for
other purposes permitted hereunder; and for these purposes, Lenders are willing
to make certain loans and other extensions of credit to Borrower of up to such
amount upon the terms and conditions set forth herein; and
WHEREAS, Borrower has agreed to secure all of its obligations under the
Loan Documents by granting to Agent, for the benefit of Agent and Lenders, a
security interest in and lien upon all of its existing and after-acquired
personal and real property; and
WHEREAS, Alba-Waldensian, Inc., a Delaware corporation ("WALDENSIAN"),
Encompass Group, L.L.C., a Delaware limited liability company ("ENCOMPASS") and
GE Capital (in its capacity as a Member of the Borrower, the "GE STOCKHOLDER,"
and, together with Waldensian and Encompass, the "BORROWER STOCKHOLDERS") are
willing to pledge to Agent, for the benefit of Agent and Lenders, all of the
Stock of Borrower to secure the Obligations; and
WHEREAS, capitalized terms used in this Agreement shall have the meanings
ascribed to them in ANNEX A and, for purposes of this Agreement and the other
Loan Documents, the rules of construction set forth in ANNEX A shall govern. All
Annexes, Disclosure Schedules, Exhibits and other attachments (collectively,
"APPENDICES") hereto, or expressly identified to this Agreement, are
incorporated herein by reference, and taken together with this Agreement, shall
constitute but a single agreement. These Recitals shall be construed as part of
the Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 CREDIT FACILITIES.
(a) Revolving Credit Facility.
(i) Subject to the terms and conditions hereof, each Revolving
Lender agrees to make available to Borrower from time to time until the
Commitment Termination Date its Pro Rata Share of advances (each, a "REVOLVING
CREDIT ADVANCE"). The Pro Rata Share of the Revolving Loan of any Revolving
Lender shall not at any time exceed its separate Revolving Loan Commitment. The
obligations of each Revolving Lender hereunder shall be several and not joint.
Until the Commitment Termination Date, Borrower may from time to time borrow,
repay and reborrow under this SECTION 1.1(A); PROVIDED, that (i) Borrower shall
not be permitted to borrow under this SECTION 1.1(A) more than once during any
week, (ii) the amount of any requested Revolving Credit Advance shall not be
less than $ 100,000 and (iii) the amount of any Revolving Credit Advance to be
made at any time shall not exceed Borrowing Availability at such time. Borrowing
Availability may be further reduced by Reserves imposed by Agent in its
reasonable credit judgment. Each Revolving Credit Advance shall be made on
notice by Borrower to one of the representatives of Agent identified in SCHEDULE
1.1 at the address specified therein. Any such notice must be given no later
than (1) 11:00 a.m. (New York time) on the Business Day of the proposed
Revolving Credit Advance, in the case of an Index Rate Loan, or (2) 11:00 a.m.
(New York time) on the date which is 3 Business Days prior to the proposed
Revolving Credit Advance, in the case of a LIBOR Loan. Each such notice (a
"NOTICE OF REVOLVING CREDIT ADVANCE") must be given in writing (by telecopy or
overnight courier) substantially in the form of EXHIBIT 1.1(A)(I), and shall
include the information required in such Exhibit and such other information as
may be required by Agent. If Borrower desires to have the Revolving Credit
Advances bear interest by reference to a LIBOR Rate, it must comply with SECTION
1.5(E).
(ii) Except as provided in SECTION 1.12, Borrower shall execute
and deliver to each Revolving Lender a note to evidence the Revolving Loan
Commitment of that Revolving Lender. Each note shall be in the principal amount
of the Revolving Loan Commitment of the applicable Revolving Lender, dated the
Closing Date and substantially in the form of EXHIBIT 1.1(A)(II) (each a
"REVOLVING NOTE" and, collectively, the "REVOLVING NOTES"). Each Revolving Note
shall represent the obligation of Borrower to pay the amount of Revolving
Lender's Revolving Loan Commitment or, if less, such Revolving Lender's Pro Rata
Share of the aggregate unpaid principal amount of all Revolving Credit Advances
to Borrower together with interest thereon as prescribed in SECTION 1.5. The
entire unpaid balance of the Revolving Credit Advances and all other
non-contingent Obligations shall be immediately due and payable in full in
immediately available funds on the Commitment Termination Date and all Letters
of Credit shall be cancelled, supported by a stand-by Letter of Credit or cash
collateral shall be provided therefor all in accordance with the provisions of
ANNEX B.
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(iii) Any provision of this Agreement to the contrary
notwithstanding, at the request of Borrower, in its discretion Agent may (but
shall have absolutely no obligation to), make Revolving Credit Advances to
Borrower on behalf of Revolving Lenders in amounts that cause the outstanding
balance of the aggregate Revolving Loan to exceed the Borrowing Base (any such
excess Revolving Credit Advances are herein referred to collectively as
"OVERADVANCES"); PROVIDED that (A) no such event or occurrence shall cause or
constitute a waiver of Agent's, or Revolving Lenders' right to refuse to make
any further Overadvances, or Revolving Credit Advances, or incur any Letter of
Credit Obligations, as the case may be, at any time that an Overadvance exists,
and (B) no Overadvance shall result in a Default or Event of Default due to
Borrower's failure to comply with SECTION 1.3(B)(I) for so long as Agent permits
such Overadvance to remain outstanding, but solely with respect to the amount of
such Overadvance. In addition, Overadvances may be made even if the conditions
to lending set forth in SECTION 2 have not been met. All Overadvances shall
constitute Index Rate Loans, shall bear interest at the Default Rate and shall
be payable on demand. Except as otherwise provided in SECTION 1.11(B), the
authority of Agent to make Overadvances is limited to an aggregate amount not to
exceed $250,000 at any time, shall not cause the Revolving Loan to exceed the
Maximum Amount, and may be revoked prospectively by a written notice to Agent
signed by Revolving Lenders holding more than 50% of the Revolving Loan
Commitments.
(b) TERM LOAN.
(i) Subject to the terms and conditions hereof, each Term
Lender agrees to make a term loan (collectively, the "TERM LOAN") on the Closing
Date to Borrower in the original principal amount of its Term Loan Commitment.
The obligations of each Term Lender hereunder shall be several and not joint.
The Term Loan shall be evidenced by promissory notes substantially in the form
of EXHIBIT 1.1(B) (each a "TERM NOTE" and collectively the "TERM NOTES"), and,
except as provided in SECTION 1.12, Borrower shall execute and deliver each Term
Note to the applicable Term Lender. Each Term Note shall represent the
obligation of Borrower to pay the amount of the applicable Term Lender's Term
Loan, together with interest thereon as prescribed in SECTION 1.5.
(ii) Borrower shall repay the principal amount of the Term Loan
in twenty (20) consecutive quarterly installments on the first day of January 1,
April 1, July 1 and October 1 of each year, commencing January 1, 2003, in an
aggregate amount equal to $750,000 on each installment date.
The final installment shall be due on September 6, 2007 shall be in
the amount of $750,000 or, if different, the remaining principal balance of the
Term Loan.
(iii) Notwithstanding SECTION 1.1(B)(II), the aggregate
outstanding principal balance of the Term Loan shall be due and payable in full
in
3
immediately available funds on the Commitment Termination Date, if not sooner
paid in full. No payment with respect to the Term Loan may be reborrowed.
(iv) Each payment of principal with respect to the Term Loan
shall be paid to Agent for the ratable benefit of each Term Lender, ratably in
proportion to each such Term Lender's respective Term Loan Commitment.
1.2 LETTERS OF CREDIT. Subject to and in accordance with the terms
and conditions contained herein and in ANNEX B, Borrower shall have the right to
request, and Revolving Lenders agree to incur, or purchase participations in,
Letter of Credit Obligations in respect of Borrower.
1.3 PREPAYMENTS.
(a) VOLUNTARY PREPAYMENTS. Borrower may at any time on at least 5
days' prior written notice to Agent voluntarily prepay all or part of the Term
Loan; PROVIDED that any such prepayments shall be in a minimum amount of
$500,000 and integral multiples of $250,000 in excess of such amount. Borrower
may voluntarily repay Revolving Credit Advances in accordance with and pursuant
to SECTION 1.1(A). In addition, Borrower may at any time on at least 10 days'
prior written notice to Agent terminate the Revolving Loan Commitment; PROVIDED
that upon such termination, all Loans and other Obligations shall be immediately
due and payable in full and all Letter of Credit Obligations shall be cash
collateralized or otherwise satisfied in accordance with ANNEX B. Any such
voluntary prepayment and any such termination of the Revolving Loan Commitment
must be accompanied by the payment of the Fee required by SECTION 1.9(C), if
any, plus the payment of any LIBOR funding breakage costs in accordance with
SECTION 1.13(B). Upon any such prepayment and termination of the Revolving Loan
Commitment, Borrower's right to request Revolving Credit Advances, or request
that Letter of Credit Obligations be incurred on its behalf, shall
simultaneously be terminated. Any partial prepayments of the Term Loan made by
Borrower shall be applied to prepay the scheduled installments of the Term Loan
in inverse order of maturity.
(b) MANDATORY PREPAYMENTS.
(i) If at any time the outstanding balances of the Revolving
Loan exceed the lesser of (A) the Maximum Amount and (B) the Borrowing Base,
Borrower shall immediately repay the aggregate outstanding Revolving Credit
Advances to the extent required to eliminate such excess. If any such excess
remains after repayment in full of the aggregate outstanding Revolving Credit
Advances, Borrower shall provide cash collateral for the Letter of Credit
Obligations in the manner set forth in ANNEX B to the extent required to
eliminate such excess. Notwithstanding the foregoing, any Overadvance made
pursuant to SECTION 1.1(A)(III) shall be repaid only on demand.
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(ii) Within one (1) Business Day of receipt by any Credit Party
of cash proceeds of any asset disposition (excluding proceeds of asset
dispositions permitted by SECTION 6.8(A) and proceeds which are intended to be
and which are in fact used to purchase similar assets within 180 days of the
disposition of such asset) or any sale of Stock of any Subsidiary of any Credit
Party, Borrower shall prepay the Loans in an amount equal to all such proceeds,
net of (A) commissions and other reasonable and customary transaction costs,
fees and expenses properly attributable to such transaction and payable by
Borrower in connection therewith (in each case, paid to non-Affiliates), (B)
transfer taxes, (C) amounts payable to holders of senior Liens (to the extent
such Liens constitute Permitted Encumbrances hereunder), if any, and (D) an
appropriate reserve for income taxes in accordance with GAAP in connection
therewith; PROVIDED that no cash proceeds shall be required to be so applied
unless and until the aggregate amount of such cash proceeds for all dispositions
which have not yet been applied exceeds $50,000 at which point all such cash
proceeds shall be applied to the prepayment of the Loans. Any such prepayment
shall be applied in accordance with SECTION 1.3(C).
(iii) If Borrower issues Stock, no later than the Business Day
following the date of receipt of the cash proceeds thereof, Borrower shall
prepay the Loans in an amount equal to seventy-five percent (75%) of all such
proceeds net of underwriting discounts and commissions and other reasonable
costs paid to non-Affiliates in connection therewith. Any such prepayment shall
be applied in accordance with SECTION 1.3(C).
(iv) Until the Termination Date, Borrower shall prepay the
Obligations on the date that is 10 days after the earlier of (A) the date on
which Borrower's annual audited Financial Statements for the immediately
preceding Fiscal Year are delivered pursuant to ANNEX E or (B) the date on which
such annual audited Financial Statements were required to be delivered pursuant
to ANNEX E, (1) except as provided in CLAUSE (2), in an amount equal to fifty
percent (50%) of Excess Cash Flow for the immediately preceding Fiscal Year or
(2) in the event the Leverage Ratio at the end of the immediately preceding
Fiscal Year is less than 1.0x, in an amount equal to twenty-five percent (25%)
of Excess Cash Flow for the immediate preceding Fiscal Year. Any prepayments
from Excess Cash Flow paid pursuant to this CLAUSE (IV) shall be applied in
accordance with SECTION 1.3(C). Each such prepayment shall be accompanied by a
certificate signed by Borrower's chief financial officer certifying the manner
in which Excess Cash Flow and the resulting prepayment were calculated, which
certificate shall be in form and substance reasonably satisfactory to Agent.
(c) APPLICATION OF CERTAIN MANDATORY PREPAYMENTS. Any prepayments
made by Borrower pursuant to SECTIONS 1.3(B)(II), (B)(III), OR (B)(IV) above or
SECTION 1.3(D) below shall be applied as follows: FIRST, to Fees and
reimbursable expenses of Agent then due and payable pursuant to any of the Loan
Documents; SECOND, to interest then due and payable on the Term Loan; THIRD, to
prepay the scheduled principal installments of the Term Loan in inverse order of
maturity, until such Term Loan shall
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have been prepaid in full; FOURTH, to interest then due and payable on the
Revolving Credit Advances; FIFTH, to the outstanding principal balance of
Revolving Credit Advances until the same has been paid in full; and SIXTH, to
any Letter of Credit Obligations, to provide cash collateral therefor in the
manner set forth in ANNEX B, until all such Letter of Credit Obligations have
been fully cash collateralized in the manner set forth in ANNEX B. The Revolving
Loan Commitment shall not be permanently reduced by the amount of any such
prepayments.
(d) APPLICATION OF PREPAYMENTS FROM INSURANCE PROCEEDS AND
CONDEMNATION PROCEEDS. Prepayments from insurance or condemnation proceeds in
accordance with SECTION 5.4(C) and the Mortgage(s), respectively, shall be
applied to the prepayment of Loans and Fees and expenses in accordance with
SECTION 1.3(C) above.
(e) NO IMPLIED CONSENT. Nothing in this SECTION 1.3 shall be
construed to constitute Agent's or any Lender's consent to any transaction that
is not permitted by other provisions of this Agreement or the other Loan
Documents.
1.4 USE OF PROCEEDS. Borrower shall utilize the proceeds of the Term
Loan and the Revolving Loan solely for the Refinancing, for payment of fees and
expenses relating to the Related Transactions, and for the financing of
Borrower's ordinary working capital and capital expenditure needs. DISCLOSURE
SCHEDULE (1.4) contains a description of Borrower's sources and uses of funds as
of the Closing Date, including Loans and Letter of Credit Obligations to be made
or incurred on that date, and a funds flow memorandum detailing how funds from
each source are to be transferred to particular uses.
1.5 Interest and Applicable Margins.
(a) Borrower shall pay interest to Agent, for the ratable benefit of
Lenders in accordance with the Revolving Credit Advances or Term Loans, as
applicable being made by each Lender, in arrears on each applicable Interest
Payment Date, at the following rates: (i) with respect to the Revolving Credit
Advances, the Index Rate plus the Applicable Revolver Index Margin per annum or,
at the election of Borrower, the applicable LIBOR Rate plus the Applicable
Revolver LIBOR Margin per annum, based on the aggregate Revolving Credit
Advances outstanding from time to time; and (ii) with respect to the Term Loan,
the Index Rate plus the Applicable Term Loan Index Margin per annum or, at the
election of Borrower, the applicable LIBOR Rate plus the Applicable Term Loan
LIBOR Margin per annum.
As of the Closing Date, the Applicable Margins are as follows:
Applicable Revolver Index Margin 3.00%
Applicable Revolver LIBOR Margin 4.50%
6
Applicable Term Loan Index Margin 3.00%
Applicable Term Loan LIBOR Margin 4.50%
The Applicable Margins shall be adjusted (up or down) prospectively on
a quarterly basis as determined by Borrower's consolidated financial
performance, commencing with the first day of the first calendar month that
occurs more than 5 days after delivery of Borrower's quarterly Financial
Statements to Lenders for the Fiscal Quarter ending June 30, 2003. ADJUSTMENTS
IN APPLICABLE MARGINS WILL BE DETERMINED BY REFERENCE TO THE FOLLOWING GRIDS:
------------------------------- ---------------------------------
IF LEVERAGE RATIO IS: LEVEL OF APPLICABLE MARGINS:
------------------------------- ---------------------------------
< 1.5x Level I
------------------------------- ---------------------------------
> 1.5x, but < 2.0x Level II
------------------------------- ---------------------------------
> 2.0x Level III
------------------------------- ---------------------------------
------------------------------------------ -------------------------------------
APPLICABLE MARGINS
------------------------------------------ -------------------------------------
LEVEL I LEVEL II LEVEL III
------------------------------------------ ----------- ------------ ------------
Applicable Revolver Index Margin 2.50% 2.75% 3.00%
------------------------------------------ ----------- ------------ ------------
Applicable Revolver LIBOR Margin 4.00% 4.25% 4.50%
------------------------------------------ ----------- ------------ ------------
Applicable Term Loan Index Margin 2.50% 2.75% 3.00%
------------------------------------------ ----------- ------------ ------------
Applicable Term Loan LIBOR Margin 4.00% 4.25% 4.50%
------------------------------------------ ----------- ------------ ------------
------------------------------------------ ----------- ------------ ------------
All adjustments in the Applicable Margins after June 30, 2003 shall be
implemented quarterly on a prospective basis, for each calendar month commencing
at least 5 days after the date of delivery to Lenders of the quarterly unaudited
or annual audited (as applicable) Financial Statements evidencing the need for
an adjustment. Concurrently with the delivery of those Financial Statements,
Borrower shall deliver to Agent and Lenders a certificate, signed by its chief
financial officer, setting forth in reasonable detail the basis for the
continuance of, or any change in, the Applicable Margins. Failure to timely
deliver such Financial Statements shall, in addition to any other remedy
provided for in this Agreement, result in an increase in the Applicable Margins
to the highest level set forth in the foregoing grid, until the first day of the
first calendar month following the delivery of those Financial Statements
demonstrating that such an increase is not required. If a Default or an Event of
Default has occurred and is continuing at the time any reduction in the
Applicable Margins is to be implemented, that reduction shall be deferred until
the first day of the first calendar month following the date on which such
Default or Event of Default is waived or cured.
7
(b) If any payment on any Loan becomes due and payable on a day other
than a Business Day, the maturity thereof will be extended to the next
succeeding Business Day (except as set forth in the definition of LIBOR Period)
and, with respect to payments of principal, interest thereon shall be payable at
the then applicable rate during such extension.
(c) All computations of Fees calculated on a per annum basis and
interest shall be made by Agent on the basis of a 360-day year, in each case for
the actual number of days occurring in the period for which such interest and
Fees are payable. The Index Rate is a floating rate determined for each day.
Each determination by Agent of an interest rate and Fees hereunder shall be
final, binding and conclusive on Borrower, absent manifest error.
(d) So long as an Event of Default has occurred and is continuing
under SECTION 8.1(H) OR (I), or so long as any other Default or Event of Default
has occurred and is continuing and at the election of Agent (or upon the written
request of Requisite Lenders) confirmed by written notice from Agent to
Borrower, the interest rates applicable to the Loans and the Letter of Credit
Fees shall be increased by two percentage points (2%) per annum above the rates
of interest or the rate of such Fees otherwise applicable hereunder ("DEFAULT
RATE"), and all outstanding Obligations shall bear interest at the Default Rate
applicable to such Obligations. Interest and Letter of Credit Fees at the
Default Rate shall accrue from the initial date of such Default or Event of
Default until that Default or Event of Default is cured or waived and shall be
payable upon demand.
(e) Subject to the conditions precedent set forth in SECTION 2.2,
Borrower shall have the option to (i) request that any Revolving Credit Advance
be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding
Loans from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan to an
Index Rate Loan, subject to payment of LIBOR breakage costs in accordance with
SECTION 1.13(B) if such conversion is made prior to the expiration of the LIBOR
Period applicable thereto, or (iv) continue all or any portion of any Loan as a
LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding
LIBOR Period of that continued Loan shall commence on the first day after the
last day of the LIBOR Period of the Loan to be continued. Any Loan or group of
Loans having the same proposed LIBOR Period to be made or continued as, or
converted into, a LIBOR Loan must be in a minimum amount of $500,000 and
integral multiples of $100,000 in excess of such amount. Any such election must
be made by 11:00 a.m. (New York time) on the 3rd Business Day prior to (1) the
date of any proposed Advance which is to bear interest at the LIBOR Rate, (2)
the end of each LIBOR Period with respect to any LIBOR Loans to be continued as
such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to
a LIBOR Loan for a LIBOR Period designated by Borrower in such election. If no
election is received with respect to a LIBOR Loan by 11:00 a.m. (New York time)
on the 3rd Business Day prior to the end of the LIBOR Period with respect
thereto (or if a Default or an Event of
8
Default has occurred and is continuing or the additional conditions precedent
set forth in SECTION 2.2 shall not have been satisfied), that LIBOR Loan shall
be converted to an Index Rate Loan at the end of its LIBOR Period. Borrower must
make such election by notice to Agent in writing, by telecopy or overnight
courier. In the case of any conversion or continuation, such election must be
made pursuant to a written notice (a "NOTICE OF CONVERSION/CONTINUATION") in the
form of EXHIBIT 1.5(E).
(f) Notwithstanding anything to the contrary set forth in this
SECTION 1.5, if a court of competent jurisdiction determines in a final order
that the rate of interest payable hereunder exceeds the highest rate of interest
permissible under law (the "MAXIMUM LAWFUL RATE"), then so long as the Maximum
Lawful Rate would be so exceeded, the rate of interest payable hereunder shall
be equal to the Maximum Lawful Rate; PROVIDED, HOWEVER, that if at any time
thereafter the rate of interest payable hereunder is less than the Maximum
Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum
Lawful Rate until such time as the total interest received by Agent, on behalf
of Lenders, is equal to the total interest that would have been received had the
interest rate payable hereunder been (but for the operation of this paragraph)
the interest rate payable since the Closing Date as otherwise provided in this
Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of
interest and in the manner provided in SECTIONS 1.5(A) THROUGH (E), unless and
until the rate of interest again exceeds the Maximum Lawful Rate, and at that
time this paragraph shall again apply. In no event shall the total interest
received by any Lender pursuant to the terms hereof exceed the amount that such
Lender could lawfully have received had the interest due hereunder been
calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum
Lawful Rate is calculated pursuant to this paragraph, such interest shall be
calculated at a daily rate equal to the Maximum Lawful Rate divided by the
number of days in the year in which such calculation is made. If,
notwithstanding the provisions of this SECTION 1.5(F), a court of competent
jurisdiction shall finally determine that a Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent
permitted by applicable law, promptly apply such excess in the order specified
in SECTION 1.11 and thereafter shall refund any excess to Borrower or as a court
of competent jurisdiction may otherwise order.
1.6 ELIGIBLE ACCOUNTS. All of the Accounts owned by Borrower and
reflected in the most recent Borrowing Base Certificate delivered by Borrower to
Agent shall be "ELIGIBLE ACCOUNTS" for purposes of this Agreement, except any
Account to which any of the exclusionary criteria set forth below applies. Agent
shall have the right to establish, modify or eliminate Reserves against Eligible
Accounts from time to time in its reasonable credit judgment. In addition, Agent
reserves the right, at any time and from time to time after the Closing Date, to
adjust any of the criteria set forth below, to establish new criteria and to
adjust advance rates with respect to Eligible Accounts, in its reasonable credit
judgment. Eligible Accounts shall not include any Account of Borrower:
9
(a) that does not arise from the sale of goods or the performance of
services by Borrower in the ordinary course of its business;
(b) (i) upon which Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) as to which Borrower is not able to bring suit or otherwise enforce its
remedies against the Account Debtor through judicial process, or (iii) if the
Account represents a progress billing consisting of an invoice for goods sold or
used or services rendered pursuant to a contract under which the Account
Debtor's obligation to pay that invoice is subject to Borrower's completion of
further performance under such contract or is subject to the equitable lien of a
surety bond issuer;
(c) in the event that any defense, counterclaim, setoff (except to
the extent permitted in CLAUSE (J) below) or dispute is asserted as to such
Account;
(d) that is not a true and correct statement of bona fide
indebtedness incurred in the amount of the Account for merchandise sold to or
services rendered and accepted by the applicable Account Debtor;
(e) with respect to which an invoice, reasonably acceptable to Agent
in form and substance, has not been sent to the applicable Account Debtor;
(f) that (i) is not owned by Borrower or (ii) is subject to any
right, claim, security interest or other interest of any other Person, other
than Liens in favor of Agent, on behalf of itself and Lenders and Liens
described in CLAUSE (A) of the definition of "Permitted Encumbrances" which
arise by operation of law;
(g) that arises from a sale to any director, officer, other employee or
Affiliate of any Credit Party, or to any entity that has any common officer or
director with any Credit Party (other than sales to Encompass pursuant to and in
accordance with the terms of the Supply Agreement);
(h) that is the obligation of an Account Debtor that is the United
States government or a political subdivision thereof, or any state, county or
municipality or department, agency or instrumentality thereof unless Agent, in
its sole discretion, has agreed to the contrary in writing and Borrower, if
necessary or desirable, has complied with respect to such obligation with the
Federal Assignment of Claims Act of 1940, or any applicable state, county or
municipal law restricting the assignment thereof with respect to such
obligation.
(i) that is the obligation of an Account Debtor located in a foreign
country other than Canada (excluding the province of Newfoundland, the Northwest
Territories and the Territory of Nunavit) unless payment thereof is assured by a
letter of credit assigned and delivered to Agent, satisfactory to Agent as to
form, amount and issuer.
10
(j) to the extent Borrower or any Subsidiary thereof is liable for
goods sold or services rendered by the applicable Account Debtor to Borrower or
any Subsidiary thereof but only to the extent of the potential offset;
(k) that arises with respect to goods that are delivered on a
xxxx-and-hold, cash-on-delivery basis or placed on consignment, guaranteed sale
or other terms by reason of which the payment by the Account Debtor is or may be
conditional;
(l) that is in default (other than being past due which default shall
be subject to the periods set forth in subclause (i) below); PROVIDED, THAT,
without limiting the generality of the foregoing, an Account shall be deemed in
default upon the occurrence of any of the following:
(i) the Account is not paid within the earlier of: 60 days
following its due date or 90 days following its original invoice date;
(ii) the Account Debtor obligated upon such Account suspends
business, makes a general assignment for the benefit of creditors or fails to
pay its debts generally as they come due; or
(iii) a petition is filed by or against any Account Debtor
obligated upon such Account under any bankruptcy law or any other federal, state
or foreign (including any provincial) receivership, insolvency relief or other
law or laws for the relief of debtors;
(m) that is the obligation of an Account Debtor if 50% or more of the
Dollar amount of all Accounts owing by that Account Debtor are ineligible under
the other criteria set forth in this SECTION 1.6;
(n) as to which Agent's Lien thereon, on behalf of itself and
Lenders, is not a first priority perfected Lien;
(o) as to which any of the representations or warranties in the Loan
Documents are untrue;
(p) to the extent such Account is evidenced by a judgment, Instrument
or Chattel Paper;
(q) to the extent such Account exceeds any credit limit established
by Agent, in its reasonable credit judgment;
(r) to the extent that such Account, together with all other Accounts
owing to such Account Debtor and its Affiliates (other than Encompass,
Allegiance Healthcare and Xxxxx and Minor) as of any date of determination
exceed 10% of all Eligible Accounts;
11
(s) that is payable in any currency other than Dollars; or
(t) that is otherwise unacceptable to Agent in its reasonable credit
judgment.
1.7 ELIGIBLE INVENTORY. All of the inventory owned by the Borrower
and reflected in the most recent Borrowing Base Certificate delivered by
Borrower to Agent shall be "ELIGIBLE INVENTORY" for purposes of this Agreement,
except any Inventory to which any of the exclusionary criteria set forth below
applies. Agent shall have the right to establish, modify, or eliminate Reserves
against Eligible Inventory from time to time in its reasonable credit judgment.
In addition, Agent reserves the right, at any time and from time to time after
the Closing Date, to adjust any of the criteria set forth below, to establish
new criteria and to adjust advance rates with to Eligible Inventory in its
reasonable credit judgment. Eligible Inventory shall not include any Inventory
of Borrower that:
(a) is not owned by Borrower free and clear of all Liens and rights
of any other Person (including the rights of a purchaser that has made progress
payments and the rights of a surety that has issued a bond to assure Borrower's
performance with respect to that Inventory), except the Liens in favor of Agent,
on behalf of itself and Lenders;
(b) (i) is not located on premises owned, leased or rented by
Borrower and set forth in DISCLOSURE SCHEDULE (3.2) or (ii) is stored at a
leased location, unless Agent has given its prior consent thereto and unless (x)
a reasonably satisfactory landlord waiver has been delivered to Agent, or (y)
Reserves satisfactory to Agent have been established with respect thereto, (iii)
is stored with a bailee or warehouseman unless a reasonably satisfactory,
acknowledged bailee letter has been received by Agent and Reserves reasonably
satisfactory to Agent have been established with respect thereto, or (iv) is
located at an owned location subject to a mortgage in favor of a lender other
than Agent, unless a reasonably satisfactory mortgagee waiver has been delivered
to Agent, or (v) is located at any site if the aggregate book value of Inventory
at any such location is less than $100,000;
(c) is placed on consignment or is in transit;
(d) is covered by a negotiable document of title, unless such
document has been delivered to Agent with all necessary endorsements, free and
clear of all Liens except those in favor of Agent and Lenders;
(e) is excess, obsolete, unsalable, shopworn, seconds, damaged or
unfit for sale;
(f) consists of display items or packing or shipping materials,
manufacturing supplies, work-in-process Inventory or replacement parts;
12
(g) consists of goods which have been returned by the buyer;
(h) is not of a type held for sale in the ordinary course of
Borrower's business;
(i) is not subject to a first priority lien in favor of Agent on
behalf of itself and Lenders subject to Permitted Encumbrances;
(j) breaches any of the representations or warranties pertaining to
Inventory set forth in the Loan Documents;
(k) consists of any costs associated with "freight-in" charges;
(l) consists of Hazardous Materials or goods that can be transported
or sold only with licenses that are not readily available;
(m) is not covered by casualty insurance reasonably acceptable to
Agent; or
(n) is otherwise unacceptable to Agent in its reasonable credit
judgment.
1.8 CASH MANAGEMENT SYSTEMS. On or prior to the Closing Date,
Borrower will establish and will maintain until the Termination Date, the cash
management systems described in ANNEX C (the "CASH MANAGEMENT SYSTEMS").
1.9 FEES.
(a) Borrower shall pay to GE Capital, individually, the Fees
specified in that certain fee letter of even date herewith between Borrower and
GE Capital (the "GE CAPITAL FEE LETTER"), at the times specified for payment
therein.
(b) As additional compensation for the Revolving Lenders, Borrower
shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the
first Business Day of each month prior to the Commitment Termination Date and on
the Commitment Termination Date, a Fee for Borrower's non-use of available funds
in an amount equal to one-half of one percent (0.50%) per annum (calculated on
the basis of a 360 day year for actual days elapsed) multiplied by the
difference between (x) the Maximum Amount (as it may be reduced from time to
time) and (y) the average for the period of the daily closing balances of the
Revolving Loan outstanding during the period for which the such Fee is due.
(c) If Borrower pays after acceleration or prepays all or any portion
of the Term Loan or prepays the Revolving Loan and terminates the Revolving Loan
Commitment, whether voluntarily or involuntarily and whether before or after
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acceleration of the Obligations or if the Commitments are otherwise terminated,
Borrower shall pay to Agent, for the benefit of Lenders as liquidated damages
and compensation for the costs of being prepared to make funds available
hereunder an amount equal to the Applicable Percentage (as defined below)
multiplied by the sum of (i) the principal amount of the Term Loan paid after
acceleration or prepaid, and (ii) the amount of the Maximum Amount on the date
hereof. As used herein, the term "APPLICABLE PERCENTAGE" shall mean (x) two
percent (2.00%), in the case of a prepayment on or prior to the first
anniversary of the Closing Date and (y) one percent (1.00%), in the case of a
prepayment after the first anniversary of the Closing Date but on or prior to
the third anniversary thereof. The Credit Parties agree that the Applicable
Percentages are a reasonable calculation of Lenders' lost profits in view of the
difficulties and impracticality of determining actual damages resulting from an
early termination of the Commitments. Notwithstanding the foregoing, no
prepayment fee shall be payable by Borrower upon a mandatory prepayment made
pursuant to SECTIONS 1.3(B)(I) OR (IV), 1.3(D) OR 1.16(C); PROVIDED that
Borrower does not terminate the Revolving Loan Commitment upon any such
prepayment.
(d) Borrower shall pay to Agent, for the ratable benefit of Revolving
Lenders, the Letter of Credit Fee as provided in ANNEX B.
1.10 RECEIPT OF PAYMENTS. Borrower shall make each payment under this
Agreement not later than 2:00 p.m. (New York time) on the day when due in
immediately available funds in Dollars to the Collection Account. For purposes
of computing interest and Fees and determining Borrowing Availability as of any
date, all payments shall be deemed received on the Business Day on which
immediately available funds therefor are received in the Collection Account
prior to 2:00 p.m. New York time. Payments received after 2:00 p.m. New York
time on any Business Day or on a day that is not a Business Day shall be deemed
to have been received on the following Business Day.
1.11 Application and Allocation of Payments.
(a) So long as no Event of Default has occurred and is continuing,
(i) payments consisting of proceeds of Accounts received in the ordinary course
of business shall be applied to the Revolving Loan; (ii) payments matching
specific scheduled payments then due shall be applied to those scheduled
payments; (iii) voluntary prepayments shall be applied as determined by
Borrower, subject to the provisions of SECTION 1.3(A); and (iv) mandatory
prepayments shall be applied as set forth in SECTIONS 1.3(C). All payments and
prepayments applied to a particular Loan shall be applied ratably to the portion
thereof held by each Lender as determined by its Pro Rata Share. As to any other
payment, and as to all payments made when an Event of Default has occurred and
is continuing or following the Commitment Termination Date, Borrower hereby
irrevocably waives the right to direct the application of any and all payments
received from or on behalf of Borrower, and Borrower hereby irrevocably agrees
that
14
Agent shall have the continuing exclusive right to apply any and all such
payments against the Obligations as Agent may deem advisable notwithstanding any
previous entry by Agent in the Loan Account or any other books and records. In
the absence of a specific determination by Agent with respect thereto, payments
shall be applied to amounts then due and payable in the following order: (1) to
Fees and Agent's expenses reimbursable hereunder; (2) to interest on the other
Loans, ratably in proportion to the interest accrued as to each Loan; (3) to
principal payments on the other Loans and to provide cash collateral for Letter
of Credit Obligations in the manner described in ANNEX B, ratably to the
aggregate, combined principal balance of the other Loans and outstanding Letter
of Credit Obligations; and (4) to all other Obligations including expenses of
Lenders to the extent reimbursable under SECTION 11.3.
(b) Agent is authorized to, and at its sole election may, charge to
the Revolving Loan balance on behalf of Borrower and cause to be paid all Fees,
expenses, Charges, costs (including insurance premiums in accordance with
SECTION 5.4(A)) and interest and principal, other than principal of the
Revolving Loan, owing by Borrower under this Agreement or any of the other Loan
Documents if and to the extent Borrower fails to pay promptly any such amounts
as and when due, even if the amount of such charges would exceed Borrowing
Availability at such time. At Agent's option and to the extent permitted by law,
any charges so made shall constitute part of the Revolving Loan hereunder.
1.12 LOAN ACCOUNT AND ACCOUNTING. Agent shall maintain a loan account
(the "LOAN ACCOUNT") on its books to record: all Advances and the Term Loan, all
payments made by Borrower, and all other debits and credits as provided in this
Agreement with respect to the Loans or any other Obligations. All entries in the
Loan Account shall be made in accordance with Agent's customary accounting
practices as in effect from time to time. The balance in the Loan Account, as
recorded on Agent's most recent printout or other written statement, shall,
absent manifest error, be presumptive evidence of the amounts due and owing to
Agent and Lenders by Borrower; PROVIDED that any failure to so record or any
error in so recording shall not limit or otherwise affect Borrower's duty to pay
the Obligations. Agent shall render to Borrower a monthly accounting of
transactions with respect to the Loans setting forth the balance of the Loan
Account for the immediately preceding month. Unless Borrower notifies Agent in
writing of any objection to any such accounting (specifically describing the
basis for such objection), within 30 days after the date thereof, each and every
such accounting shall, absent manifest error, be deemed final, binding and
conclusive on Borrower in all respects as to all matters reflected therein. Only
those items expressly objected to in such notice shall be deemed to be disputed
by Borrower. Notwithstanding any provision herein contained to the contrary, any
Lender may elect (which election may be revoked) to dispense with the issuance
of Notes to that Lender and may rely on the Loan Account as evidence of the
amount of Obligations from time to time owing to it.
1.13 INDEMNITY.
15
(a) Each Credit Party that is a signatory hereto shall jointly and
severally indemnify and hold harmless each of Agent, Lenders and their
respective Affiliates, and each such Person's respective officers, directors,
employees, attorneys, agents and representatives (each, an "INDEMNIFIED
Person"), from and against any and all suits, actions, proceedings, claims,
damages, losses, liabilities and expenses (including reasonable attorneys' fees
and disbursements and other reasonable costs of investigation or defense,
including those incurred upon any appeal) that may be instituted or asserted
against or incurred by any such Indemnified Person as the result of credit
having been extended, suspended or terminated under this Agreement and the other
Loan Documents and the administration of such credit, and in connection with or
arising out of the transactions contemplated hereunder and thereunder and any
actions or failures to act in connection therewith, including any and all
Environmental Liabilities and reasonable legal costs and expenses arising out of
or incurred in connection with disputes between or among ANY PARTIES to any of
the Loan Documents (collectively, "INDEMNIFIED LIABILITIES"); PROVIDED, that no
such Credit Party shall be liable for any indemnification to an Indemnified
Person to the extent that any such suit, action, proceeding, claim, damage,
loss, liability or expense results from that Indemnified Person's gross
negligence or willful misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR
LIABLE TO ANY OTHER PARTY TO ANY LOAN DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD
PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER ANY LOAN DOCUMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(b) To induce Lenders to provide the LIBOR Rate option on the terms
provided herein, if (i) any LIBOR Loans are repaid in whole or in part prior to
the last day of any applicable LIBOR Period (whether that repayment is made
pursuant to any provision of this Agreement or any other Loan Document or occurs
as a result of acceleration, by operation of law or otherwise); (ii) Borrower
shall default in payment when due of the principal amount of or interest on any
LIBOR Loan; (iii) Borrower shall refuse to accept any borrowing of, or shall
request a termination of any borrowing, conversion into or continuation of LIBOR
Loans after Borrower has given notice requesting the same in accordance
herewith; or (iv) Borrower shall fail to make any prepayment of a LIBOR Loan
after Borrower has given a notice thereof in accordance herewith, then Borrower
shall indemnify and hold harmless each Lender from and against all losses, costs
and expenses resulting from or arising from any of the foregoing. Such
indemnification shall include any loss (excluding loss of margin) or expense
arising from the reemployment of funds obtained by it or from fees payable to
terminate deposits from which such funds were obtained. For the purpose of
calculating amounts payable to a Lender under this subsection, each Lender shall
be deemed to have actually funded its relevant LIBOR Loan through the purchase
of a deposit bearing interest at the LIBOR
16
Rate in an amount equal to the amount of that LIBOR Loan and having a maturity
comparable to the relevant LIBOR Period; PROVIDED, that each Lender may fund
each of its LIBOR Loans in any manner it sees fit, and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this
subsection. This covenant shall survive the termination of this Agreement and
the payment of the Notes and all other amounts payable hereunder. As promptly as
practicable under the circumstances, each Lender shall provide Borrower with its
written calculation of all amounts payable pursuant to this SECTION 1.13(B), and
such calculation shall be binding on the parties hereto unless Borrower shall
object in writing within 10 Business Days of receipt thereof, specifying the
basis for such objection in detail.
1.14 ACCESS. Each Credit Party that is a party hereto shall, during
normal business hours, from time to time upon one (1) Business Day's prior
notice as frequently as Agent determines to be appropriate: (a) provide Agent
and any of its officers, employees and agents access to its properties,
facilities, advisors and employees (including officers) of each Credit Party and
to the Collateral, (b) permit Agent, and any of its officers, employees and
agents, to inspect, audit and make extracts from any Credit Party's books and
records, and (c) permit Agent, and its officers, employees and agents, to
inspect, review, evaluate and make test verifications and counts of the
Accounts, Inventory and other Collateral of any Credit Party. If a Default or
Event of Default has occurred and is continuing or if access is necessary to
preserve or protect the Collateral as determined by the Agent, each such Credit
Party shall provide such access to Agent and to each Lender at all times and
without advance notice. Furthermore, so long as any Event of Default has
occurred and is continuing, Borrower shall provide Agent and each Lender with
access to its suppliers and customers. Each Credit Party shall promptly, and in
any event no later than five (5) days after request therefor, make available to
Agent and its counsel originals or copies of all books and records that Agent
may reasonably request. Each Credit Party shall deliver any document or
instrument necessary for Agent, as it may from time to time request, to obtain
records from any service bureau or other Person that maintains records for such
Credit Party, and shall maintain duplicate records or supporting documentation
on media, including computer tapes and discs owned by such Credit Party. Agent
will give Lenders at least 5 days' prior written notice of regularly scheduled
audits. Representatives of other Lenders may accompany Agent's representatives
on regularly scheduled audits at no charge to Borrower.
1.15 TAXES.
(a) Any and all payments by Borrower hereunder or under the Notes
shall be made, in accordance with this SECTION 1.15, free and clear of and
without deduction for any and all present or future Taxes. If Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under the Notes, (i) the sum payable shall be increased as much as
shall be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this SECTION 1.15) Agent
or Lenders, as applicable, receive an amount equal to the sum
17
they would have received had no such deductions been made, (ii) Borrower shall
make such deductions, and (iii) Borrower shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law. Within
30 days after the date of any payment of Taxes, Borrower shall furnish to Agent
the original or a certified copy of a receipt evidencing payment thereof. So
long as there does not exist any Default or Event of Default, if the Agent or
any Lender determines that it has recovered or used as a credit any amount in
respect of Taxes withheld on its account pursuant to this SECTION 1.15 or
SECTION 1.16 which have been paid by Borrower, it shall reimburse Borrower to
the extent of such amount so determined to have been recovered or used as a
credit, PROVIDED that nothing contained in this sentence shall require the Agent
or any Lender to make available its tax returns (or any other information
relating to its taxes which it deems to be confidential).
(b) Each Credit Party that is a signatory hereto shall indemnify and,
within 10 days of demand therefor, pay Agent and each Lender for the full amount
of Taxes (including any Taxes imposed by any jurisdiction on amounts payable
under this SECTION 1.15) paid by Agent or such Lender, as appropriate, and any
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally asserted.
(c) Each Lender organized under the laws of a jurisdiction outside
the United States (a "FOREIGN LENDER") as to which payments to be made under
this Agreement or under the Notes are exempt from United States withholding tax
under an applicable statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form W-8ECI or Form W-8BEN or other
applicable form, certificate or document prescribed by the IRS or the United
States certifying as to such Foreign Lender's entitlement to such exemption (a
"CERTIFICATE OF EXEMPTION"). Any foreign Person that seeks to become a Lender
under this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender hereunder, and from time to time thereafter if
(1) a lapse in time or change in circumstances renders the previous
certification obsolete or inaccurate in any material respect or (2) reasonably
requested in writing by Borrower or the Agent (but only so long as such Lender
remains lawfully able to do so). No foreign Person may become a Lender hereunder
if such Person fails to deliver a Certificate of Exemption in advance of
becoming a Lender. In addition, if reasonably requested in writing by the
Borrower or the Agent, each Lender that is a United States person under Section
7701(a)(30) of the Code for U.S. federal income tax purposes, on or prior to the
date of its execution and delivery of this Agreement in the case of each Lender
listed on the signature pages hereof and on or prior to the date on which it
becomes a Lender in the case of each other Lender, and from time to time
thereafter if (1) a lapse in time or change in circumstances renders the
previous certification obsolete or inaccurate in any material respect or (2)
reasonably requested in writing by Borrower or the Agent (but only so long as
such Lender remains lawfully able to do so), shall provide Borrower and the
Agent with two accurate and complete original signed copies of Internal Revenue
Service Form W-9 or any successor form prescribed
18
by the Internal Revenue Service certifying that such Lender is entitled to a
complete exemption from United States withholding tax on payments pursuant to
this Agreement or any of the other Loan Documents.
1.16 Capital Adequacy; Increased Costs; Illegality.
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to the
amount of that reduction and showing the basis of the computation thereof
submitted by such Lender to Borrower and to Agent shall, absent manifest error,
be final, conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any
law or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force of law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the amount of such increased cost, submitted to Borrower and
to Agent by such Lender, shall be conclusive and binding on Borrower for all
purposes, absent manifest error. Each Lender agrees that, as promptly as
practicable after it becomes aware of any circumstances referred to above which
would result in any such increased cost, the affected Lender shall, to the
extent not inconsistent with such Lender's internal policies of general
application, use reasonable commercial efforts to minimize costs and expenses
incurred by it and payable to it by Borrower pursuant to this SECTION 1.16(B).
(c) Notwithstanding anything to the contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income
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obtained therefrom, on notice thereof and demand therefor by such Lender to
Borrower through Agent, (i) the obligation of such Lender to agree to make or to
make or to continue to fund or maintain LIBOR Loans shall terminate and (ii)
Borrower shall forthwith prepay in full all outstanding LIBOR Loans owing to
such Lender, together with interest accrued thereon, UNLESS Borrower, within 5
Business Days after the delivery of such notice and demand, converts such LIBOR
Loans into Index Rate Loans.
(d) Within 15 days after receipt by Borrower of written notice and
demand from any Lender (an "AFFECTED LENDER") for payment of additional amounts
or increased costs as provided in SECTIONS 1.15(A), 1.16(A) OR 1.16(B), Borrower
may, at its option, notify Agent and such Affected Lender of its intention to
replace the Affected Lender. So long as no Default or Event of Default has
occurred and is continuing, Borrower, with the consent of Agent, may obtain, at
Borrower's expense, a replacement Lender ("REPLACEMENT LENDER") for the Affected
Lender, which Replacement Lender must be reasonably satisfactory to Agent. If
Borrower obtains a Replacement Lender within 90 days following notice of its
intention to do so, the Affected Lender must sell and assign its Loans and
Commitments to such Replacement Lender for an amount equal to the principal
balance of all Loans held by the Affected Lender and all accrued interest and
Fees with respect thereto through the date of such sale; PROVIDED, that Borrower
shall have reimbursed such Affected Lender for the additional amounts or
increased costs that it is entitled to receive under this Agreement through the
date of such sale and assignment. Notwithstanding the foregoing, Borrower shall
not have the right to obtain a Replacement Lender if the Affected Lender
rescinds its demand for increased costs or additional amounts within 15 days
following its receipt of Borrower's notice of intention to replace such Affected
Lender. Furthermore, if Borrower gives a notice of intention to replace and does
not so replace such Affected Lender within 90 days thereafter, Borrower's rights
under this SECTION 1.16(D) shall terminate and Borrower shall promptly pay all
increased costs or additional amounts demanded by such Affected Lender pursuant
to SECTIONS 1.15(A), 1.16(A) AND 1.16(B).
1.17 SINGLE LOAN. All Loans to Borrower and all of the other
Obligations of Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of Borrower secured, until the
Termination Date, by all of the Collateral.
2. CONDITIONS PRECEDENT
2.1 CONDITIONS TO THE INITIAL LOANS. No Lender shall be obligated to
make any Loan or incur any Letter of Credit Obligations on the Closing Date, or
to take, fulfill, or perform any other action hereunder, until the following
conditions have been satisfied or provided for in a manner satisfactory to
Agent, or waived in writing by Agent:
(a) CREDIT AGREEMENT; LOAN DOCUMENTS. This Agreement or counterparts
hereo shall have been duly executed by, and delivered to, Borrower, Agent
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and Lenders; and Agent shall have received such documents, instruments,
agreements and legal opinions as Agent shall reasonably request in connection
with the transactions contemplated by this Agreement and the other Loan
Documents, including all those listed in the Closing Checklist attached hereto
as ANNEX D, each in form and substance reasonably satisfactory to Agent.
(b) REPAYMENT OF PRIOR LENDER OBLIGATIONS; SATISFACTION OF
OUTSTANDING L/C'S. (i) Agent shall have received a fully executed original of a
pay-off letter reasonably satisfactory to Agent confirming that all of the Prior
Lender Obligations will be repaid in full from the proceeds of the Term Loan and
the initial Revolving Credit Advance and all Liens upon any of the property of
Borrower or any of its Subsidiaries or consisting of the Contributed Business in
favor of Prior Lender shall be terminated by Prior Lender immediately upon such
payment; and (ii) all letters of credit issued or guaranteed by Prior Lender
shall have been cash collateralized, supported by a guaranty of Agent or
supported by a Letter of Credit issued pursuant to ANNEX B, as mutually agreed
upon by Agent, Borrower and Prior Lender.
(c) APPROVALS. Agent shall have received (i) satisfactory evidence
that the Borrower has obtained all required consents and approvals of all
Persons including all requisite Governmental Authorities, to the execution,
delivery and performance of this Agreement and the other Loan Documents and the
consummation of the Related Transactions or (ii) an officer's certificate in
form and substance reasonably satisfactory to Agent affirming that no such
consents or approvals are required.
(d) OPENING AVAILABILITY. The Eligible Accounts and Eligible
Inventory supporting the initial Revolving Credit Advance and the initial Letter
of Credit Obligations incurred and the amount of the Reserves to be established
on the Closing Date shall be sufficient in value, as determined by Agent, to
provide Borrower with Borrowing Availability, after giving effect to the initial
Revolving Credit Advance, the incurrence of any initial Letter of Credit
Obligations and the consummation of the Related Transactions (on a pro forma
basis, with trade payables being paid currently, and expenses and liabilities
being paid in the ordinary course of business and without acceleration of sales)
of at least $1,000,000.
(e) PAYMENT OF FEES. Borrower shall have paid the Fees required to be
paid on the Closing Date in the respective amounts specified in SECTION 1.9
(including the Fees specified in the GE Capital Fee Letter), and shall have
reimbursed Agent for all fees, costs and expenses of closing presented as of the
Closing Date.
(f) CAPITAL STRUCTURE: OTHER INDEBTEDNESS. The capital structure of
the Borrower and the terms and conditions of all Indebtedness and all other
Material Contracts (including, without limitation, the Contribution Documents)
of the Borrower and the tax effects after giving effect to this Agreement and
the Related Transactions shall be acceptable to Agent in its sole discretion.
Without limiting the foregoing, the Funded Debt of the Borrower (which for
purposes of this CLAUSE (F) shall not include
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Capital Lease Obligations) after giving effect to the Loans hereunder on the
Closing Date and the consummation of the Related Transactions shall not exceed
$17,000,000.
(g) DUE DILIGENCE. Agent shall have completed its business and legal
due diligence, including a roll forward of its previous Collateral audit with
results reasonably satisfactory to Agent.
(h) CONSUMMATION OF RELATED TRANSACTIONS. Agent shall have received
fully executed copies of the Contribution Agreement and each of the other
Related Transactions Documents, each of which shall be in form and substance
reasonably satisfactory to Agent and its counsel (including, without limitation,
provisions permitting such agreements to be pledged to Agent and Lenders). The
Contribution and the other Related Transactions (including the contribution of
cash and assets by Encompass and Waldensian) shall have been consummated in
accordance with the terms of the Contribution Documents and the other Related
Transactions Documents.
(i) ACCOUNTANTS. Borrower shall have retained Ernst & Young as its
independent certified public accountant.
(j) MANAGEMENT AND BOARD OF MANAGERS STRUCTURE. The management
structure of the Borrower and all management compensation and incentive programs
and the composition and members of the Board of Managers shall be acceptable to
Agent in its sole discretion. Without limiting the foregoing, Agent shall have
received fully executed copies of the Employment Agreements, each of which shall
be in form and substance reasonably satisfactory to Agent and its counsel.
2.2 FURTHER CONDITIONS TO EACH LOAN. Except as otherwise expressly
provided herein, no Lender shall be obligated to fund any Advance, convert or
continue any Loan as a LIBOR Loan or incur any Letter of Credit Obligation, if,
as of the date thereof:
(a) any representation or warranty by any Credit Party contained
herein or in any other Loan Document is untrue or incorrect as of such date,
except to the extent that such representation or warranty expressly relates to
an earlier date and except for changes therein expressly permitted or expressly
contemplated by this Agreement, and Agent or Requisite Revolving Lenders have
determined not to make such Advance, convert or continue any Loan as LIBOR Loan
or incur such Letter of Credit Obligation as a result of the fact that such
warranty or representation is untrue or incorrect;
(b) any event or circumstance having a Material Adverse Effect has
occurred since the date hereof as determined by the Requisite Revolving Lenders,
and Agent or Requisite Revolving Lenders have determined not to make such
Advance, convert or continue any Loan as a LIBOR Loan or incur such Letter of
Credit Obligation as a result of the fact that such event or circumstance has
occurred;
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(c) (i) any Default or Event of Default has occurred and is
continuing or would result after giving effect to any Advance (or the incurrence
of any Letter of Credit Obligation), and Agent or Requisite Revolving Lenders
shall have determined not to make any Advance, convert or continue any Loan as a
LIBOR Loan or incur any Letter of Credit Obligation as a result of that Default
or Event of Default; or
(d) after giving effect to any Advance (or the incurrence of any
Letter of Credit Obligations), the outstanding principal amount of the Revolving
Loan would exceed the lesser of the Borrowing Base and the Maximum Amount.
The request and acceptance by Borrower of the proceeds of any Advance, the
incurrence of any Letter of Credit Obligations or the conversion or continuation
of any Loan into, or as, a LIBOR Loan shall be deemed to constitute, as of the
date thereof, (i) a representation and warranty by Borrower that the conditions
in this SECTION 2.2 have been satisfied and (ii) a reaffirmation by Borrower of
the granting and continuance of Agent's Liens, on behalf of itself and Lenders,
pursuant to the Collateral Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Lenders to make the Loans and to incur Letter of Credit
Obligations, the Credit Parties executing this Agreement, jointly and severally,
make the following representations and warranties to Agent and each Lender with
respect to all Credit Parties, each and all of which shall survive the execution
and delivery of this Agreement. In the case of Borrower, the representations and
warranties shall be deemed to apply to Borrower and, to the extent applicable,
the Contributed Business.
3.1 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each Credit Party (a)
is a corporation, limited liability company or limited partnership duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation or organization set forth in DISCLOSURE
SCHEDULE (3.1); (b) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified would not result in exposure to losses, damages or
liabilities in excess of $50,000 and DISCLOSURE SCHEDULE (3.1) sets forth all
such jurisdictions as of the Closing Date; (c) has the requisite power and
authority and the legal right to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease and to
conduct its business as now, heretofore and proposed to be conducted; (d)
subject to specific representations regarding Environmental Laws, has all
material licenses, permits, consents or approvals from or by, and has made all
material filings with, and has given all material notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (e) is in compliance with its charter and bylaws or
partnership or operating agreement, as applicable; and (f) subject to specific
representations set forth herein regarding ERISA, Environmental Laws, tax and
other laws, is in compliance with all applicable provisions
23
of law, except where the failure to comply, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
3.2 EXECUTIVE OFFICES, COLLATERAL LOCATIONS, FEIN. As of the Closing
Date, the current location of each Credit Party's chief executive office and the
warehouses and premises at which any Collateral is located are set forth in
DISCLOSURE SCHEDULE (3.2), and none of such locations has changed within 12
months preceding the Closing Date. As of the Closing Date the value of the
Collateral located in the premises set forth in Schedule Supplement 3.2 to
DISCLOSURE SCHEDULE (3.2) does not exceed $100,000. In addition, DISCLOSURE
SCHEDULE (3.2) lists the federal employer identification number of each Credit
Party.
3.3 CORPORATE POWER, AUTHORIZATION, ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance by each Credit Party of the Loan Documents
to which it is a party and the creation of all Liens provided for therein: (a)
are within such Person's power; (b) have been duly authorized by all necessary
corporate, limited liability company or limited partnership action; (c) do not
contravene any provision of such Person's charter, bylaws or partnership or
operating agreement as applicable; (d) do not violate any applicable law or
regulation, or any applicable order or decree of any court or Governmental
Authority, except to the extent that such violation, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect;
(e) do not conflict with or result in the breach or termination of, constitute a
default under or accelerate or permit the acceleration of any performance
required by, any indenture, mortgage, deed of trust, lease, agreement or other
instrument to which such Person is a party or by which such Person or any of its
property is bound, except to the extent that such conflict, breach, termination,
default or acceleration, individually or in the aggregate, could not reasonably
be expected to have a Material Adverse Effect; (f) do not result in the creation
or imposition of any Lien upon any of the property of such Person other than
those in favor of Agent, on behalf of itself and Lenders, pursuant to the Loan
Documents; and (g) do not require the consent or approval of any Governmental
Authority or any other Person, except those referred to in SECTION 2.1(C), all
of which will have been duly obtained, made or complied with prior to the
Closing Date. Each of the Loan Documents shall be duly executed and delivered by
each Credit Party that is a party thereto and each such Loan Document shall
constitute a legal, valid and binding obligation of such Credit Party
enforceable against it in accordance with its terms.
3.4 FINANCIAL STATEMENTS AND PROJECTIONS. Except for the Projections,
all Financial Statements concerning Waldensian and its Subsidiaries and Borrower
and its Subsidiaries that are referred to below have been prepared in accordance
with GAAP consistently applied throughout the periods covered (except as
disclosed therein and except, with respect to unaudited Financial Statements,
for the absence of footnotes and normal year-end audit adjustments) and present
fairly in all material respects the financial position of the Persons covered
thereby as at the dates thereof and the results of their operations and cash
flows for the periods then ended.
24
(a) FINANCIAL STATEMENTS. The following Financial Statements attached
hereto as DISCLOSURE SCHEDULE (3.4(A)) have been delivered on the date hereof:
(i) The audited consolidated and consolidating balance sheets
at December 31, 2000 and the related statements of income and cash flows of
Waldensian and its Subsidiaries for the Fiscal Year then ended, certified by
Xxxxxx Xxxxxxxx LLP.
(ii) The consolidated and consolidating balance sheets at
December 31, 2001 and the related statements of income and cash flows of
Waldensian and its Subsidiaries for the Fiscal Year then ended.
(iii) The audited special purpose balance sheet at December 31,
2001 and the related statement of income of the health products division of
Waldensian (the assets of which have been transferred to the Borrower pursuant
to the Contribution Agreement) of Waldensian and its Subsidiaries for the Fiscal
Year then ended certified by Xxxxxx Xxxxxxxx LLP.
(iv) The unaudited balance sheet(s) at March 31, 2002 and
June 30, 2002 and the related statement(s) of income and cash flows of
Waldensian and its Subsidiaries for each of the Fiscal Quarters then ended.
(v) The unaudited balance sheets at March 31, 2002 and
June 30, 2002 and the related statements of income of Borrower and its
Subsidiaries for each of the Fiscal Quarters then ended based upon the Financial
Statements referred to in CLAUSE (II) above, prepared by Xxxxxx Xxxxxxxx LLP.
(b) PRO FORMA. The Pro Forma (opening balance sheet) delivered on the
date hereof and attached hereto as DISCLOSURE SCHEDULE (3.4(B)) was prepared by
Ernst & Young giving PRO FORMA effect to the Related Transactions, was based on
the unaudited consolidated and consolidating balance sheets of Borrower and its
Subsidiaries (including as owned by Waldensian prior to the date hereof) dated
June 30, 2002 and was prepared in accordance with GAAP, with only such
adjustments thereto as would be required in accordance with GAAP.
(c) PROJECTIONS. The Projections delivered on the date hereof and
attached hereto as DISCLOSURE SCHEDULE (3.4(C)) have been prepared by Borrower
in light of the past operations of its businesses, and reflect projections for
the five-year period beginning on January 1, 2002 on a year-by-year basis. The
Projections are based upon estimates and assumptions stated therein, all of
which Borrower believes to be reasonable and fair in light of current conditions
and current facts known to Borrower and, as of the Closing Date, reflect
Borrower's good faith and reasonable estimates of the future financial
performance of Borrower and of the other information projected therein for the
period set forth therein.
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3.5 MATERIAL ADVERSE EFFECT. Between December 31, 2001 and the
Closing Date, (a) no Credit Party has incurred any obligations, contingent or
noncontingent liabilities, liabilities for Charges, long-term leases or unusual
forward or long-term commitments that are not reflected in the Pro Forma and
that, alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, (b) no contract, lease or other agreement or instrument has been
entered into by any Credit Party or has become binding upon any Credit Party's
assets and no law or regulation applicable to any Credit Party has been adopted
that has had or could reasonably be expected to have a Material Adverse Effect,
and (c) no Credit Party is in default and to the best of Borrower's knowledge no
third party is in default under any material contract, lease or other agreement
or instrument, that alone or in the aggregate could reasonably be expected to
have a Material Adverse Effect. Between December 31, 2001 and the Closing Date
no event has occurred, that alone or together with other events, could
reasonably be expected to have a Material Adverse Effect.
3.6 OWNERSHIP OF PROPERTY; LIENS. As of the Closing Date, the real
estate ("REAL ESTATE") listed in DISCLOSURE SCHEDULE (3.6) constitutes all of
the real property owned, leased, subleased, or in the case of real property
which is not public property, used on a regular basis by any Credit Party. Each
Credit Party owns good and marketable fee simple title to all of its owned Real
Estate, and valid and marketable leasehold interests in all of its leased Real
Estate, all as described on DISCLOSURE SCHEDULE (3.6), and copies of all such
leases or a summary of terms thereof reasonably satisfactory to Agent have been
delivered to Agent. DISCLOSURE SCHEDULE (3.6) further describes any Real Estate
with respect to which any Credit Party is a lessor, sublessor or assignor as of
the Closing Date. Each Credit Party also has good and marketable title to, or
valid leasehold interests in, all of its personal property and assets. As of the
Closing Date, none of the properties and assets of any Credit Party are subject
to any Liens other than Permitted Encumbrances, and there are no facts,
circumstances or conditions known to any Credit Party that may result in any
Liens (including Liens arising under Environmental Laws) other than Permitted
Encumbrances. Each Credit Party has received all deeds, assignments, waivers,
consents, nondisturbance and attornment or similar agreements, bills of sale and
other documents, and has duly effected all recordings, filings and other actions
necessary to establish, protect and perfect such Credit Party's right, title and
interest in and to all such Real Estate and other properties and assets (other
than assets which do not exceed $25,000 in the aggregate). DISCLOSURE SCHEDULE
(3.6) also describes any purchase options, rights of first refusal or other
similar contractual rights pertaining to any Real Estate. As of the Closing
Date, no portion of any Credit Party's Real Estate has suffered any material
damage by fire or other casualty loss that has not heretofore been repaired and
restored in all material respects to its original condition or otherwise
remedied. As of the Closing Date, all material permits required to have been
issued or appropriate to enable the Real Estate to be lawfully occupied and used
for all of the purposes for which it is currently occupied and used have been
lawfully issued and are in full force and effect.
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3.7 LABOR MATTERS. As of the Closing Date (a) no strikes or other
material labor disputes against any Credit Party are pending or, to any Credit
Party's knowledge, threatened; (b) hours worked by and payment made to employees
of each Credit Party comply with the Fair Labor Standards Act and each other
federal, state, local or foreign law applicable to such matters; (c) all
payments due from any Credit Party for employee health and welfare insurance
have been paid or accrued as a liability on the books of such Credit Party; (d)
except as set forth in DISCLOSURE SCHEDULE (3.7), no Credit Party is a party to
or bound by any collective bargaining agreement, management agreement,
consulting agreement, employment agreement, bonus, restricted stock, stock
option, or stock appreciation plan or agreement or any similar plan, agreement
or arrangement (and true and complete copies of any agreements described on
DISCLOSURE SCHEDULE (3.7) have been delivered to Agent); (e) there is no
organizing activity involving any Credit Party pending or, to any Credit Party's
knowledge, threatened by any labor union or group of employees; (f) there are no
representation proceedings pending or, to any Credit Party's knowledge,
threatened with the National Labor Relations Board, and no labor organization or
group of employees of any Credit Party has made a pending demand for
recognition; and (g) except as set forth in DISCLOSURE SCHEDULE (3.7), there are
no material complaints or charges against any Credit Party pending or, to the
knowledge of any Credit Party, threatened to be filed with any Governmental
Authority or arbitrator based on, arising out of, in connection with, or
otherwise relating to the employment or termination of employment by any Credit
Party of any individual.
3.8 VENTURES, SUBSIDIARIES AND AFFILIATES; OUTSTANDING STOCK AND
INDEBTEDNESS. Except as set forth in DISCLOSURE SCHEDULE (3.8), as of the
Closing Date, no Credit Party has any Subsidiaries, is engaged in any joint
venture or partnership with any other Person, or is an Affiliate of any other
Person. All of the issued and outstanding Stock of each Credit Party is owned by
each of the Stockholders and in the amounts set forth in DISCLOSURE SCHEDULE
(3.8). Except as set forth in DISCLOSURE SCHEDULE (3.8), there are no
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which any Credit Party may be required to issue, sell,
repurchase or redeem any of its Stock or other equity securities or any Stock or
other equity securities of its Subsidiaries. All outstanding Indebtedness and
Guaranteed Indebtedness of each Credit Party as of the Closing Date (except for
the Obligations) is described in SECTION 6.3 (including DISCLOSURE SCHEDULE
(6.3)). All of the outstanding Stock have been duly authorized, validly issued
and are fully paid and non-assessable and such Stock was not issued in violation
of the securities registration, securities disclosure or similar laws of any
jurisdiction to which such issuance may be subject.
3.9 GOVERNMENT REGULATION. No Credit Party is an "investment company"
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940. No Credit Party is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or
27
limits its ability to incur Indebtedness or to perform its obligations
hereunder. The making of the Loans by Lenders to Borrower, the incurrence of the
Letter of Credit Obligations on behalf of Borrower, the application of the
proceeds thereof and repayment thereof and the consummation of the Related
Transactions will not violate any provision of any such statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
3.10 MARGIN REGULATIONS. No Credit Party is engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" as such terms are defined in Regulation U of the Federal Reserve Board as
now and from time to time hereafter in effect (such securities being referred to
herein as "MARGIN STOCK"). No Credit Party owns any Margin Stock, and none of
the proceeds of the Loans or other extensions of credit under this Agreement
will be used, directly or indirectly, for the purpose of purchasing or carrying
any Margin Stock, for the purpose of reducing or retiring any Indebtedness that
was originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a "purpose credit" within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Credit Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.
3.11 TAXES. All material tax returns, reports and statements,
including information returns, required by any Governmental Authority ("TAX
RETURNS") to be filed by any Credit Party have been filed with the appropriate
Governmental Authority; all such Tax Returns are true, correct and complete in
all material respects; and all Charges have been paid prior to the date on which
any fine, penalty, interest or late charge may be added thereto for nonpayment
thereof (or any such fine, penalty, interest, late charge or loss has been
paid), excluding Charges or other amounts being contested in accordance with
SECTION 5.2(B). As of the Closing Date, no adjustment relating to such Tax
Returns has been proposed formally or informally by any Governmental Authority.
Proper and accurate amounts have been withheld by each Credit Party from its
respective employees, independent contractors, creditors, members, partners and
other third parties for all periods in full and complete compliance in all
material respects with all applicable federal, state, local and foreign laws and
such withholdings have been timely paid to the respective Governmental
Authorities. DISCLOSURE SCHEDULE (3.11) sets forth as of the Closing Date those
taxable years for which any Credit Party's tax returns are currently being
audited by the IRS or any other applicable Governmental Authority, and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as indicated on DISCLOSURE SCHEDULE
(3.11) , all Charges that have been claimed, proposed, asserted or assessed
against any Credit Party (or with respect to any of their assets) have been
fully paid or finally settled. Except as described in DISCLOSURE SCHEDULE
(3.11), no Credit Party has executed or filed with the IRS or any other
Governmental Authority any agreement or other document extending, or having the
28
effect of extending, the period for assessment or collection of any Charges.
None of the Credit Parties or their respective predecessors (to the extent any
Credit Party would be liable therefor whether by contract, operation of law or
otherwise) are liable for any Charges: (a) under any agreement (including any
tax sharing agreements) or (b) to each Credit Party's knowledge, as a
transferee. As of the Closing Date, no Credit Party has agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, which would have a Material Adverse Effect.
3.12 ERISA.
(a) DISCLOSURE SCHEDULE (3.12) lists all Plans and separately
identifies all Pension Plans, including Title IV Plans, Multiemployer Plans,
ESOPs and Welfare Plans, including all Retiree Welfare Plans. Copies of all such
listed Plans, together with a copy of the latest form. IRS/DOL 5500-series, if
any, for each such Plan have been delivered to Agent. Except with respect to
Multiemployer Plans, each Qualified Plan has been determined by the IRS to
qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the IRC,
and nothing has occurred that would cause the loss of such qualification or
tax-exempt status. Except as could not reasonably be expected to have a Material
Adverse Effect, each Plan is in compliance with the applicable provisions of
ERISA and the IRC, including the timely filing of all reports required under the
IRC or ERISA, including the statement required by 29 CFR Section 2520.104-23.
Neither any Credit Party nor ERISA Affiliate has failed to make any contribution
or pay any amount due as required by either Section 412 of the IRC or Section
302 of ERISA or the terms of any such Plan. Except as could not reasonably be
expected to have a Material Adverse Effect, neither any Credit Party nor ERISA
Affiliate has engaged in a "prohibited transaction," as defined in Section 406
of ERISA and Section 4975 of the IRC, in connection with any Plan, that would
subject any Credit Party to a material tax on prohibited transactions imposed by
Section 502(i) of ERISA or Section 4975 of the IRC.
(b) No Plan is a Title IV Plan or a Multi-employer Plan. Except in
the case of any ESOP, Stock of all Credit Parties and their ERISA Affiliates
makes up, in the aggregate, no more than 10% of fair market value of the assets
of any Plan measured on the basis of fair market value as of the latest
valuation date of any Plan.
3.13 NO LITIGATION. No action, claim, lawsuit, demand, investigation
or proceeding is now pending or, to the knowledge of any Credit Party,
threatened against any Credit Party, before any Governmental Authority or before
any arbitrator or panel of arbitrators (collectively, "Litigation"), (a) that
challenges any Credit Party's right or power to enter into or perform any of its
obligations under the Related Transaction Documents to which it is a party, or
the validity or enforceability of any Related Transaction Document or any action
taken thereunder, or (b) that has a reasonable risk of being determined
adversely to any Credit Party and that, if so determined, could
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reasonably be expected to have a Material Adverse Effect. Except as set forth on
DISCLOSURE SCHEDULE (3.13), as of the Closing Date there is no Litigation
pending or threatened that seeks damages in excess of $50,000 or injunctive
relief against, or alleges criminal misconduct of, any Credit Party.
3.14 BROKERS. Except for SPP Capital Partners LLC, whose fees and
expenses have been disclosed to Agent and will be paid by the Borrower, no
broker or finder acting on behalf of any Credit Party or Affiliate thereof
brought about the obtaining, making or closing of the Loans or the Related
Transactions, and no Credit Party or Affiliate thereof has any obligation to any
Person in respect of any finder's or brokerage fees in connection therewith.
3.15 INTELLECTUAL PROPERTY. As of the Closing Date, each Credit Party
owns or has rights to use all Intellectual Property necessary to continue to
conduct, in all material respects, its business as now or heretofore conducted
by it and each Patent, Trademark, registered Copyright and License is listed,
together with application or registration numbers, as applicable, in DISCLOSURE
SCHEDULE (3.15). Each Credit Party conducts its business and affairs without
infringement of or interference with any Intellectual Property of any other
Person in any material respect. As of the Closing Date except as set forth in
DISCLOSURE SCHEDULE (3.15), no Credit Party is aware of any infringement claim
by any other Person with respect to any Intellectual Property.
3.16 FULL DISCLOSURE. No information contained in this Agreement, any
of the other Loan Documents, any Projections, Financial Statements or Collateral
Reports or other written reports from time to time delivered hereunder or any
written statement furnished by or on behalf of any Credit Party to Agent or any
Lender pursuant to the terms of this Agreement contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which they were made. The Liens granted to
Agent, on behalf of itself and Lenders, pursuant to the Collateral Documents
will at all times be fully perfected first priority Liens in and to the
Collateral described therein, subject, as to priority, only to Permitted
Encumbrances.
3.17 ENVIRONMENTAL MATTERS.
(a) Except as set forth in DISCLOSURE SCHEDULE (3.17), as of the
Closing Date: (i) the Real Estate is free of contamination from any Hazardous
Material except for such contamination that would not adversely impact the value
or marketability of such Real Estate and that would not result in Environmental
Liabilities, other than Environmental Liabilities and adverse impacts on value
or marketability that could not reasonably be expected to exceed $25,000 in the
aggregate; (ii) no Credit Party has caused or suffered to occur any Release of
Hazardous Materials on, at, in, under, above, to, from or about any of its Real
Estate; (iii) the Credit Parties are and have been in compliance with all
Environmental Laws, except for such noncompliance that would not result in
Environmental Liabilities which could reasonably be expected to exceed
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$25,000 in the aggregate; (iv) the Credit Parties have obtained, and are in
compliance with, all Environmental Permits required by Environmental Laws for
the operations of their respective businesses as presently conducted or as
proposed to be conducted, except where the failure to so obtain or comply with
such Environmental Permits would not result in Environmental Liabilities that
could reasonably be expected to exceed $25,000 in the aggregate, and all such
Environmental Permits are valid, uncontested and in good standing; (v) no Credit
Party is involved in operations or knows of any facts, circumstances or
conditions, including any Releases of Hazardous Materials, that are likely to
result in any Environmental Liabilities of such Credit Party which could
reasonably be expected to exceed $25,000 in the aggregate, and no Credit Party
has permitted any current or former tenant or occupant of the Real Estate to
engage in any such operations; (vi) there is no Litigation arising under or
related to any Environmental Laws, Environmental Permits or Hazardous Material
that seeks damages, penalties, fines, costs or expenses in excess of $50,000 in
the aggregate from or injunctive relief against, or that alleges criminal
misconduct by, any Credit Party; (vii) no notice has been received by any Credit
Party identifying it as a "potentially responsible party" or requesting
information under CERCLA or analogous state statutes, and to the knowledge of
the Credit Parties, there are no facts, circumstances or conditions that could
reasonably be expected to result in any Credit Party being identified as a
"potentially responsible party" under CERCLA or analogous state statutes; and
(viii) the Credit Parties have provided to Agent copies of all existing
environmental reports, reviews and audits and all material written information
pertaining to actual or potential Environmental Liabilities, in each case
relating to any Credit Party.
(b) Each Credit Party hereby acknowledges and agrees that Agent (i)
is not now, and has not ever been, in control of any of the Real Estate or any
Credit Party's affairs, and (ii) does not have the capacity through the
provisions of the Loan Documents or otherwise to influence any Credit Party's
conduct with respect to the ownership, operation or management of any of its
Real Estate or compliance with Environmental Laws or Environmental Permits.
3.18 INSURANCE. DISCLOSURE SCHEDULE (3.18) lists all insurance
policies of any nature maintained, as of the Closing Date, for current
occurrences by each Credit Party.
3.19 DEPOSIT AND DISBURSEMENT ACCOUNTS. DISCLOSURE SCHEDULE (3.19)
lists all banks and other financial institutions at which any Credit Party
maintains deposit or other accounts as of the Closing Date, including any
Disbursement Accounts, and such Schedule correctly identifies the name, address
and telephone number of each depository, the name in which the account is held,
a description of the purpose of the account, and the complete account number
therefor.
3.20 GOVERNMENT CONTRACTS. Except as set forth in DISCLOSURE SCHEDULE
(3.20), as of the Closing Date, no Credit Party is a party to any contract or
agreement
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with any Governmental Authority and no Credit Party's Accounts are subject to
the Federal Assignment of Claims Act (31 U.S.C. Section 3727) or any similar
state or local law.
3.21 CUSTOMER AND TRADE RELATIONS. As of the Closing Date, there
exists no actual or, to the knowledge of any Credit Party, threatened
termination or cancellation of, or any material adverse modification or change
in the business relationship of any Credit Party with any customer or group of
customers whose purchases during the preceding 12 months caused them to be
ranked among the ten largest customers of such Credit Party; or the business
relationship of any Credit Party with any supplier material to its operations.
3.22 AGREEMENTS AND OTHER DOCUMENTS. As of the Closing Date, each
Credit Party has provided to Agent or its counsel, on behalf of Lenders,
accurate and complete copies (or summaries) of all of the following agreements
or documents to which it is subject and each of which is listed in DISCLOSURE
SCHEDULE (3.22): (a) supply agreements and purchase agreements not terminable by
such Credit Party within 60 days following written notice issued by such Credit
Party and involving transactions in excess of $250,000 per annum; (b) all supply
agreements or similar agreements (other than agreements made in the ordinary
course of business which are not evidenced by any written agreement other than
customary purchase orders) pursuant to which the Credit Parties are paid revenue
of more than $250,000 in any 12-month period; (c) leases of Equipment having a
remaining term of one year or longer and requiring aggregate rental and other
payments in excess of $100,000 per annum; (d) licenses and permits held by the
Credit Parties, the absence of which could be reasonably likely to have a
Material Adverse Effect; (e) instruments and documents evidencing any
Indebtedness or Guaranteed Indebtedness of such Credit Party and any Lien
granted by such Credit Party with respect thereto; and (f) instruments and
agreements evidencing the issuance of any equity securities, warrants, rights or
options to purchase equity securities of such Credit Party.
3.23 SOLVENCY. Both before and after giving effect to (a) the Loans
and Letter of Credit Obligations to be made or incurred on the Closing Date or
such other date as Loans and Letter of Credit Obligations requested hereunder
are made or incurred, (b) the disbursement of the proceeds of such Loans
pursuant to the instructions of Borrower, (c) the Contribution, the Refinancing
and the consummation of the other Related Transactions and (d) the payment and
accrual of all transaction costs in connection with the foregoing, each Credit
Party is and will be Solvent.
3.24 CONTRIBUTION DOCUMENTS. As of the Closing Date, Borrower has
delivered to Agent a complete and correct copy of the Contribution Documents
(including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other documents delivered pursuant thereto or in connection
therewith). As of the Closing Date, no Credit Party and, to the knowledge of the
Credit Parties, no other Person
32
party thereto is in default in the performance or compliance with any provisions
thereof. The Contribution Documents comply with, and the Contribution has been
consummated in accordance with, all applicable laws, except to the extent that
the failure to comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect. The Contribution Documents are in
full force and effect as of the Closing Date and have not been terminated,
rescinded or withdrawn. All requisite material approvals by Governmental
Authorities having jurisdiction over Waldensian, Encompass, any Credit Party and
other Persons referenced therein, with respect to the transactions contemplated
by the Contribution Documents, have been obtained, and no such approvals impose
any conditions to the consummation of the transactions contemplated by the
Contribution Documents or to the conduct by any Credit Party of its business
thereafter. To the best of each Credit Party's knowledge, none of Waldensian's
or Encompass' representations or warranties (and any qualifications limitations
or exceptions thereto) in the Contribution Documents contain any untrue
statement of a material fact or omit any material fact necessary to make the
statements therein not misleading. Each of the representations and warranties
given by each applicable Credit Party in the Contribution Documents is true and
correct in all material respects. Notwithstanding anything contained in the
Contribution Documents to the contrary, such representations and warranties of
the Credit Parties are incorporated into this Agreement by this SECTION 3.24 and
shall, solely for purposes of this Agreement and the benefit of Agent and
Lenders (in their capacity as Lenders), survive the consummation of the
Contribution.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 REPORTS AND NOTICES.
(a) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent or to Agent and Lenders, as required, the Financial Statements,
notices, Projections and other information at the times, to the Persons and in
the manner set forth in ANNEX E.
(b) Each Credit Party executing this Agreement hereby agrees that
from and after the Closing Date and until the Termination Date, it shall deliver
to Agent or to Agent and Lenders, as required, the various Collateral Reports
(including Borrowing Base Certificates in the form of EXHIBIT 4.1(B)) at the
times, to the Persons and in the manner set forth in ANNEX F.
4.2 COMMUNICATION WITH ACCOUNTANTS. Each Credit Party executing this
Agreement authorizes (a) Agent and (b) so long as an Event of Default has
occurred and is continuing, each Lender, to communicate (with prior notice to
Borrower and subject to Borrower's right to be present) directly with its
independent certified public accountants, including Ernst & Young LLP, and
authorizes and, at Agent's request, shall instruct those accountants and
advisors to disclose and make available to Agent and each Lender any and all
Financial Statements and other supporting financial documents,
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schedules and information relating to any Credit Party (including copies of any
issued management letters) with respect to the business, financial condition and
other affairs of any Credit Party.
5. AFFIRMATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof and until
the Termination Date:
5.1 MAINTENANCE OF EXISTENCE AND CONDUCT OF BUSINESS. Each Credit
Party shall: do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its material rights and
franchises; continue to conduct its business substantially as now conducted or
as otherwise permitted hereunder; at all times maintain, preserve and protect
all of its assets and properties used or useful in the conduct of its business,
and keep the same in good repair, working order and condition in all material
respects (taking into consideration ordinary wear and tear) and from time to
time make, or cause to be made, all necessary or appropriate repairs,
replacements and improvements thereto consistent with industry practices; and
transact business only in such corporate and trade names as are set forth in
DISCLOSURE SCHEDULE (5.1).
5.2 PAYMENT OF CHARGES.
(a) Subject to SECTION 5.2(B), each Credit Party shall pay and
discharge or cause to be paid and discharged promptly all Charges payable by it,
including (i) Charges imposed upon it, its income and profits, or any of its
property (real, personal or mixed) and all Charges with respect to tax, social
security and unemployment withholding with respect to its employees, (ii) lawful
claims for labor, materials, supplies and services or otherwise, and (iii) all
storage or rental charges payable to warehousemen and bailees, in each case,
before any thereof shall become past due.
(b) Each Credit Party may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges, Taxes or claims described in
SECTION 5.2(A); PROVIDED, that (i) adequate reserves with respect to such
contest are maintained on the books of such Credit Party, in accordance with
GAAP; (ii) no Lien shall be imposed to secure payment of such Charges (other
than payments to warehousemen and/or bailees) that is superior to any of the
Liens securing payment of the Obligations and such contest is maintained and
prosecuted continuously and with diligence and operates to suspend collection or
enforcement of such Charges, (iii) none of the Collateral becomes subject to
forfeiture or loss as a result of such contest and, (iv) such Credit Party shall
promptly pay or discharge such contested Charges, Taxes or claims and all
additional charges, interest, penalties and expenses, if any, and shall deliver
to Agent evidence reasonably acceptable to Agent of such compliance, payment or
discharge, if such contest is terminated or discontinued adversely to such
Credit Party or the conditions set forth in this SECTION 5.2(B) are no longer
met.
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5.3 BOOKS AND RECORDS. Each Credit Party shall keep adequate books
and records with respect to its business activities in which proper entries,
reflecting all financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements attached as DISCLOSURE SCHEDULE
(3.4(A)).
5.4 Insurance; Damage to or Destruction of Collateral.
(a) The Credit Parties shall, at their sole cost and expense,
maintain the policies of insurance described on DISCLOSURE SCHEDULE (3.18) as in
effect on the date hereof or otherwise in form and amounts and with insurers
reasonably acceptable to Agent. Such policies of insurance (or the loss payable
and additional insured endorsements delivered to Agent) shall contain provisions
pursuant to which the insurer agrees to provide 30 days prior written notice to
Agent in the event of any non-renewal, cancellation or amendment of any such
insurance policy. If any Credit Party at any time or times hereafter shall fail
to obtain or maintain any of the policies of insurance required above or to pay
all premiums relating thereto, Agent may at any time or times thereafter obtain
and maintain such policies of insurance and pay such premiums and take any other
action with respect thereto that Agent deems advisable. Agent shall have no
obligation to obtain insurance for any Credit Party or pay any premiums
therefor. By doing so, Agent shall not be deemed to have waived any Default or
Event of Default arising from any Credit Party's failure to maintain such
insurance or pay any premiums therefor. All sums so disbursed, including
reasonable attorneys' fees, court costs and other charges related thereto, shall
be payable on demand by Borrower to Agent and shall be additional Obligations
hereunder secured by the Collateral.
(b) Agent reserves the right at any time upon any change in any
Credit Party's risk profile (including any change in the product mix maintained
by any Credit Party or any laws affecting the potential liability of such Credit
Party) to require additional forms and limits of insurance to, in Agent's
reasonable opinion, adequately protect both Agent's and Lender's interests in
all or any portion of the Collateral and to ensure that each Credit Party is
protected by insurance in amounts and with coverage customary for its industry.
If reasonably requested by Agent, each Credit Party shall deliver to Agent from
time to time a report of a reputable insurance broker, reasonably satisfactory
to Agent, with respect to its insurance policies.
(c) Each Credit Party shall deliver to Agent, in form and substance
reasonably satisfactory to Agent, endorsements to (i) all "All Risk" and
business interruption insurance naming Agent, on behalf of itself and Lenders,
as loss payee, and (ii) all general liability and other liability policies
naming Agent, on behalf of itself and Lenders, as additional insured. Each
Credit Party irrevocably makes, constitutes and appoints Agent (and all
officers, employees or agents designated by Agent), so long as any Default or
Event of Default has occurred and is continuing or the anticipated insurance
proceeds exceed $100,000, as such Credit Party's true and lawful agent and
attorney-in-fact for the purpose of making, settling and adjusting claims under
such "All
35
Risk" policies of insurance, endorsing the name of each Credit Party on any
check or other item of payment for the proceeds of such "All Risk" policies of
insurance and for making all determinations and decisions with respect to such
"All Risk" policies of insurance; PROVIDED, that, prior to the occurrence of an
Event of Default, Agent shall only make, settle or adjust any such claims after
consultation with and with the consent of the Borrower. Agent shall have no duty
to exercise any rights or powers granted to it pursuant to the foregoing
power-of-attorney. Borrower shall promptly notify Agent of any loss, damage, or
destruction to the Collateral in the amount of $100,000 or more, whether or not
covered by insurance. After deducting from such proceeds the expenses, if any,
incurred by Agent in the collection or handling thereof, Agent may, at its
option, apply such proceeds to the reduction of the Obligations in accordance
with SECTION 1.3(D), PROVIDED that in the case of insurance proceeds pertaining
to any Credit Party other than Borrower, such insurance proceeds shall be
applied to the Loans owing by Borrower, or permit or require each Credit Party
to use such money, or any part thereof, to replace, repair, restore or rebuild
the Collateral in a diligent and expeditious manner with materials and
workmanship of substantially the same quality as existed before the loss, damage
or destruction. Notwithstanding the foregoing, if the casualty giving rise to
such insurance proceeds could not reasonably be expected to have a Material
Adverse Effect and such insurance proceeds do not exceed $250,000 in the
aggregate, Agent shall permit the applicable Credit Party to replace, restore,
repair or rebuild the property; PROVIDED that if such Credit Party has not
completed or entered into binding agreements to complete such replacement,
restoration, repair or rebuilding within 180 days of such casualty, Agent may
apply such insurance proceeds to the Obligations in accordance with SECTION
1.3(D); PROVIDED further that in the case of insurance proceeds pertaining to
any Credit Party other than Borrower, such insurance proceeds shall be applied
to the Loans owing by Borrower. All insurance proceeds that are to be made
available to Borrower to replace, repair, restore or rebuild the Collateral
shall be applied by Agent to reduce the outstanding principal balance of the
Revolving Loan (which application shall not result in a permanent reduction of
the Revolving Loan Commitment) and upon such application, Agent shall establish
a Reserve against the Borrowing Base in an amount equal to the amount of such
proceeds so applied. All insurance proceeds made available to any Credit Party
that is not a Borrower to replace, repair, restore or rebuild Collateral shall
be deposited in a cash collateral account. Thereafter, such funds shall be made
available to such Credit Party to provide funds to replace, repair, restore or
rebuild the Collateral as follows: (i) Borrower shall request a Revolving Credit
Advance or release from the cash collateral account be made to such Credit Party
in the amount requested to be released; (ii) so long as the conditions set forth
in SECTION 2.2 have been met, Revolving Lenders shall make such Revolving Credit
Advance or Agent shall release funds from the cash collateral account; and (iii)
in the case of insurance proceeds applied against the Revolving Loan, the
Reserve established with respect to such insurance proceeds shall be reduced by
the amount of such Revolving Credit Advance. To the extent not used to replace,
repair, restore or rebuild the Collateral, such insurance proceeds shall be
applied in accordance with SECTION 1.3(D); PROVIDED that in the case of
36
insurance proceeds pertaining to any Credit Party other than Borrower, such
insurance proceeds shall be applied to the Loans owing by Borrower.
5.5 COMPLIANCE WITH LAWS. Each Credit Party shall comply with all
federal, state, local and foreign laws and regulations applicable to it, except
to the extent that the failure to comply, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect.
5.6 SUPPLEMENTAL DISCLOSURE. From time to time as may be reasonably
requested by Agent (which request will not be made more frequently than once
each year absent the occurrence and continuance of a Default or an Event of
Default), the Credit Parties shall supplement each Disclosure Schedule hereto,
or any representation herein or in any other Loan Document, with respect to any
matter hereafter arising that, if existing or occurring at the date of this
Agreement, would have been required to be set forth or described in such
Disclosure Schedule or as an exception to such representation or that is
necessary to correct any information in such Disclosure Schedule or
representation which has been rendered inaccurate thereby (and, in the case of
any supplements to any Disclosure Schedule, such Disclosure Schedule shall be
appropriately marked to show the changes made therein); PROVIDED that (a) no
such supplement to any such Disclosure Schedule or representation shall amend,
supplement or otherwise modify any Disclosure Schedule or representation, or be
or be deemed a waiver of any Default or Event of Default resulting from the
matters disclosed therein, except as consented to by Agent and Requisite Lenders
in writing, and (b) no supplement shall be required or permitted as to
representations and warranties that relate solely to the Closing Date.
5.7 INTELLECTUAL PROPERTY. Each Credit Party will conduct its
business and affairs without infringement of or interference with any
Intellectual Property of any other Person in any material respect.
5.8 ENVIRONMENTAL MATTERS. Each Credit Party shall and shall cause
each Person within its control to: (a) conduct its operations and keep and
maintain its Real Estate in compliance with all Environmental Laws and
Environmental Permits other than noncompliance that could not reasonably be
expected to have a Material Adverse Effect; (b) implement any and all
investigation, remediation, removal and response actions that are appropriate or
necessary to maintain the value and marketability of the Real Estate or to
otherwise comply with Environmental Laws and Environmental Permits pertaining to
the presence, generation, treatment, storage, use, disposal, transportation or
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of its Real Estate; (c) notify Agent promptly after such Credit Party
becomes aware of any violation of Environmental Laws or Environmental Permits or
any Release on, at, in, under, above, to, from or about any Real Estate that is
reasonably likely to result in Environmental Liabilities in excess of $25,000;
and (d) promptly forward to Agent a copy of any order, notice, request for
information or any communication or report received by such Credit Party in
connection with any such violation or Release or any
37
other matter relating to any Environmental Laws or Environmental Permits that
could reasonably be expected to result in Environmental Liabilities in excess of
$25,000, in each case whether or not the Environmental Protection Agency or any
Governmental Authority has taken or threatened any action in connection with any
such violation, Release or other matter. If Agent at any time has a reasonable
basis to believe that there may be a violation of any Environmental Laws or
Environmental Permits by any Credit Party or any Environmental Liability arising
thereunder, or a Release of Hazardous Materials on, at, in, under, above, to,
from or about any of its Real Estate, that, in each case, could reasonably be
expected to have a Material Adverse Effect, then each Credit Party shall, upon
Agent's written request (i) cause the performance of such environmental audits
including subsurface sampling of soil and groundwater, and preparation of such
environmental reports, at Borrower's expense, as Agent may from time to time
reasonably request, which shall be conducted by reputable environmental
consulting firms reasonably acceptable to Agent and shall be in form and
substance reasonably acceptable to Agent, and (ii) permit Agent or its
representatives to have access to all Real Estate for the purpose of conducting
such environmental audits and testing as Agent reasonably deems appropriate,
including subsurface sampling of soil and groundwater. Borrower shall reimburse
Agent for the reasonable costs of such audits and tests and the same will
constitute a part of the Obligations secured hereunder.
5.9 LANDLORDS' AGREEMENTS, MORTGAGEE AGREEMENTS, BAILEE LETTERS AND
REAL ESTATE PURCHASES. Each Credit Party shall obtain a landlord's agreement,
mortgagee agreement or bailee letter, as applicable, from the lessor of each
leased property, mortgagee of owned property or bailee with respect to any
warehouse, processor or converter facility or other location where Collateral is
stored or located, which agreement or letter shall contain a waiver or
subordination of all Liens or claims that the landlord, mortgagee or bailee may
assert against the Collateral at that location, and shall otherwise be
reasonably satisfactory in form and substance to Agent. With respect to such
locations or warehouse space leased or owned as of the Closing Date and
thereafter, if Agent has not received a landlord or mortgagee agreement or
bailee letter as of the Closing Date (or, if later, as of the date such location
is acquired or leased), Borrower's Eligible Inventory at that location shall, in
Agent's discretion, be excluded from the Borrowing Base or be subject to such
Reserves as may be established by Agent in its reasonable credit judgment. After
the Closing Date, no real property or warehouse space shall be leased by any
Credit Party and no Inventory in excess of $100,000 in the aggregate at any one
time shall be shipped to a processor or converter under arrangements established
after the Closing Date without the prior written consent of Agent (which
consent, in Agent's discretion, may be conditioned upon the exclusion from the
Borrowing Base of Eligible Inventory at that location or the establishment of
Reserves acceptable to Agent) or, unless and until a satisfactory landlord
agreement or bailee letter, as appropriate, shall first have been obtained with
respect to such location. Each Credit Party shall timely and fully pay and
perform its obligations under all leases and other agreements with respect to
each leased location or public warehouse where any Collateral is or may be
located. To the extent permitted hereunder, if any Credit Party
38
proposes to acquire a fee ownership interest in Real Estate after the Closing
Date, it shall first provide to Agent a mortgage or deed of trust granting Agent
a first priority Lien on such Real Estate, together with environmental audits,
mortgage title insurance commitment, real property survey, local counsel
opinion(s), and, if required by Agent, supplemental casualty insurance and flood
insurance, and such other documents, instruments or agreements reasonably
requested by Agent, in each case, in form and substance reasonably satisfactory
to Agent.
5.10 EMPLOYMENT OF ACCOUNTANT. Borrower shall enter into an employment
arrangement with a Person (who shall not be an Affiliate of Waldensian or
Encompass but who may currently be an employee of Waldensian or Encompass)
reasonably acceptable to Agent and on terms acceptable to Agent to perform the
services of an accountant for the Borrower within 120 days of the Closing Date.
5.11 ERISA. Each Credit Party shall comply in all material respects
with the applicable provisions of ERISA and the IRC, except to the extent such
failure to company, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Affect. Each Credit Party shall furnish to
the Agent written notice as soon as possible, and in any event within 10
Business Days after any Credit Party knows or has reason to know, of: (a) a
material increase in the benefits of any existing Plan, the establishment of any
new Plan, or the commencement of contributions to any Plan; or (b) an ERISA
Event, together with a statement of an officer setting forth the details of such
ERISA Event and action which the Credit Parties propose to take with respect
thereto. The Credit Parties shall furnish to the Agent, within 30 Business Days
after the filing thereof with the Department of Labor, IRS or PBGC, copies of
each annual report (From 5500 series) filed for each Plan. The Credit Parties
shall furnish to the Agent, within 30 days after receipt by any Credit Party or
ERISA Affiliate, copies of each actuarial report for each Title IV Plan or
Multiemployer Plan and each annual report for any Multiemployer Plan.
5.12 FURTHER ASSURANCES. Each Credit Party executing this Agreement
agrees that it shall and shall cause each other Credit Party to, at such Credit
Party's expense and upon request of Agent, duly execute and deliver, or cause to
be duly executed and delivered, to Agent such further instruments and do and
cause to be done such further acts as may be necessary or proper in the
reasonable opinion of Agent to carry out more effectively the provisions and
purposes of this Agreement or any other Loan Document.
6. NEGATIVE COVENANTS
Each Credit Party executing this Agreement jointly and severally
agrees as to all Credit Parties that from and after the date hereof until the
Termination Date:
6.1 MERGERS, SUBSIDIARIES, ETC. No Credit Party shall directly or
indirectly, by operation of law or otherwise, (a) form or acquire any
Subsidiary, or (b)
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merge with, consolidate with, acquire all or substantially all of the assets or
Stock of, or otherwise combine with or acquire, any Person.
6.2 INVESTMENTS; LOANS AND ADVANCES. Except as otherwise expressly
permitted by this SECTION 6.2, no Credit Party shall make or permit to exist any
investment in, or make, accrue or permit to exist loans or advances of money to,
any Person, through the direct or indirect lending of money, holding of
securities or otherwise, except that: (a) Borrower may hold investments
comprised of notes payable, or stock or other securities issued by Account
Debtors to Borrower pursuant to negotiated agreements with respect to settlement
of such Account Debtor's Accounts in the ordinary course of business, so long as
the aggregate amount of such Accounts so settled by Borrower does not exceed
$100,000 in any Fiscal Year; (b) each Credit Party may maintain its existing
investments in its Subsidiaries as of the Closing Date; (c) Borrower may make,
accrue and permit to exist loans and advances to employees pursuant to Section
6.4(b); (d) Borrower may repurchase Stock of Borrower pursuant to the Put
Agreement to the extent permitted to do so pursuant to Section 6.14; and (e) so
long as Agent has not delivered an Activation Notice and there is no outstanding
Revolving Loan balance, Borrower may make investments, subject to Control
Letters in favor of Agent for the benefit of Lenders or otherwise subject to a
perfected security interest in favor of Agent for the benefit of Lenders, in (i)
marketable direct obligations issued or unconditionally guaranteed by the United
States of America or any agency thereof maturing within one year from the date
of acquisition thereof, (ii) commercial paper maturing no more than one year
from the date of creation thereof and currently having the highest rating
obtainable from either Standard & Poor's Ratings Group or Xxxxx'x Investors
Service, Inc., (iii) certificates of deposit maturing no more than one year from
the date of creation thereof issued by commercial banks incorporated under the
laws of the United States of America, each having combined capital, surplus and
undivided profits of not less than $300,000,000 and having a senior unsecured
rating of "A" or better by a nationally recognized rating agency (an "A RATED
BANK"), (iv) time deposits maturing no more than 30 days from the date of
creation thereof with A Rated Banks and (v) mutual funds that invest solely in
one or more of the investments described in CLAUSES (I) THROUGH (IV) above.
6.3 INDEBTEDNESS.
(a) No Credit Party shall create, incur, assume or permit to exist
any Indebtedness, except (without duplication) (i) Indebtedness secured by
purchase money security interests and Capital Leases permitted in SECTION
6.7(C), (ii) the Loans and the other Obligations, (iii) unfunded pension fund
and other employee benefit plan obligations and liabilities to the extent they
are permitted to remain unfunded under applicable law, (iv) existing
Indebtedness described in DISCLOSURE SCHEDULE (6.3) and refinancings thereof or
amendments or modifications thereof that do not have the effect of increasing
the principal amount thereof or changing the amortization thereof (other than to
extend the same) and that are otherwise on terms and conditions no less
favorable
40
to any Credit Party, Agent or any Lender, as determined by Agent, than the terms
of the Indebtedness being refinanced, amended or modified, and (v) Put Option
Debt; PROVIDED, that no Put Option Debt shall be permitted to be incurred
unless, after giving effect to the incurrence of any Put Option Debt, the
Leverage Ratio is less than 2.5x.
(b) No Credit Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if any, interest
or other amount payable in respect of any Indebtedness, other than (i) the
Obligations; (ii) Indebtedness secured by a Permitted Encumbrance if the asset
securing such Indebtedness has been sold or otherwise disposed of in accordance
with SECTIONS 6.8(B) OR (C); and (iii) Indebtedness permitted by SECTION
6.3(A)(IV) upon any refinancing thereof in accordance with SECTION 6.3(A)(IV).
6.4 EMPLOYEE LOANS AND AFFILIATE TRANSACTIONS.
(a) Except as otherwise expressly permitted in this Section 6 with
respect to Affiliates, no Credit Party shall enter into or be a party to any
transaction with any other Credit Party or any Affiliate thereof except in the
ordinary course of and pursuant to the reasonable requirements of such Credit
Party's business and upon fair and reasonable terms that are no less favorable
to such Credit Party than would be obtained in a comparable arm's length
transaction with a Person not an Affiliate of such Credit Party. In addition, if
any such transaction or series of related transactions involves payments in
excess of $50,000 in the aggregate during any Fiscal Year, the terms of these
transactions must be disclosed in advance to Agent and Lenders. All such
transactions existing as of the date hereof are described in DISCLOSURE SCHEDULE
(6.4(A)). For the avoidance of doubt, nothing in this Section 6.4 shall prevent
the Credit Parties from entering into and performing their respective
obligations under the Contribution Agreement, the Administrative Services
Agreement, the Sales and Marketing Agreement, or the Supply Agreement, as such
agreements are in effect as of the date hereof and as such agreements may be
amended in accordance with the terms hereof.
(b) No Credit Party shall enter into any lending or borrowing
transaction with any employees of any Credit Party, except loans to its
respective employees on an arm's-length basis in the ordinary course of business
consistent with past practices for travel and entertainment expenses, relocation
costs and similar purposes up to a maximum of $25,000 to any employee and up to
a maximum of $100,000 in the aggregate at any one time outstanding.
6.5 CAPITAL STRUCTURE AND BUSINESS. No Credit Party shall (a) make
any changes in any of its business objectives, purposes or operations that could
reasonably be expected to have or result in a Material Adverse Effect, (b) make
any change in its capital structure as described in DISCLOSURE SCHEDULE (3.8),
including the issuance or sale of any shares of Stock, warrants or other
securities convertible into Stock or any revision of the terms of its
outstanding Stock other than, in the case of Borrower, (x) as contemplated by
the Put Agreement and (y) any issuance or sale of Stock of Borrower (or options
therefor)
41
in connection with any incentive, compensation or similar plans or arrangements
provided that such issuance does not cause a Change of Control, or (c) amend its
charter or bylaws or similar organizational or governing documents in a manner
that would cause a Material Adverse Effect. No Credit Party shall engage in any
business other than the businesses currently engaged in by it as contemplated by
the Contribution Documents and business activities reasonably incidental
thereto.
6.6 GUARANTEED INDEBTEDNESS. No Credit Party shall create, incur,
assume or permit to exist any Guaranteed Indebtedness except (a) by endorsement
of instruments or items of payment for deposit to the general account of any
Credit Party, and (b) for Guaranteed Indebtedness incurred for the benefit of
any other Credit Party if the primary obligation is expressly permitted by this
Agreement.
6.7 LIENS. No Credit Party shall create, incur, assume or permit to
exist any Lien on or with respect to its Accounts or any of its other properties
or assets (whether now owned or hereafter acquired) except for (a) Permitted
Encumbrances; (b) Liens in existence on the date hereof and summarized on
DISCLOSURE SCHEDULE (6.7) securing Indebtedness described on DISCLOSURE SCHEDULE
(6.3) and permitted refinancings, extensions and renewals thereof, including
extensions or renewals of any such Liens; PROVIDED that the principal amount so
secured is not increased and the Lien does not attach to any other property; and
(c) Liens created after the date hereof by conditional sale or other title
retention agreements (including Capital Leases) or in connection with purchase
money Indebtedness with respect to Equipment and Fixtures acquired by any Credit
Party in the ordinary course of business, involving the incurrence of an
aggregate amount of purchase money Indebtedness and Capital Lease Obligations of
not more than $250,000 outstanding at any one time for all such Liens; PROVIDED
that such Liens attach only to the assets subject to such purchase money debt
and such Indebtedness is incurred within 60 days following such purchase and
does not exceed 100% of the purchase price of the subject assets. In addition,
no Credit Party shall become a party to any agreement, note, indenture or
instrument, or take any other action, that would prohibit the creation of a Lien
on any of its properties or other assets in favor of Agent, on behalf of itself
and Lenders, as additional collateral for the Obligations, except operating
leases, Capital Leases or Licenses which prohibit Liens upon the assets that are
subject thereto.
6.8 SALE OF STOCK AND ASSETS. No Credit Party shall sell, transfer,
convey, assign or otherwise dispose of any of its properties or other assets,
including the Stock of any of its Subsidiaries (whether in a public or a private
offering or otherwise) or any of its Accounts, other than (a) the sale of
Inventory in the ordinary course of business, (b) the sale, transfer, conveyance
or other disposition by a Credit Party of Equipment, Fixtures that are obsolete
or no longer used or useful in such Credit Party's business and having a book
value not exceeding $100,000 in any single transaction or $250,000 in the
aggregate in any Fiscal Year, (c) other Equipment and Fixtures having a value
not exceeding $100,000 in any single transaction or $250,000 in the aggregate in
42
any Fiscal Year, (d) the sale or transfer of any Accounts in connection with the
compromise or collection thereof in an aggregate amount not to exceed $50,000,
(e) the sale or transfer of any Accounts which do not constitute Eligible
Accounts in an aggregate amount not to exceed $50,000, (f) the liquidation of
any investment property, instruments or promissory notes for the stated value
thereof, and (g) the liquidation of any investment property, instruments,
chattel paper or promissory notes permitted to be held pursuant to Section 6.2
(other than Section 6.2(b)) for the stated value thereof. With respect to any
disposition of assets or other properties permitted pursuant to CLAUSES (B) AND
(C) above, subject to SECTION 1.3(B), Agent agrees on reasonable prior written
notice to release its Lien on such assets or other properties in order to permit
the applicable Credit Party to effect such disposition and shall execute and
deliver to Borrower, at Borrower's expense, appropriate UCC-3 termination
statements and other releases as reasonably requested by Borrower.
6.9 ERISA. No Credit Party shall, or shall cause or permit any ERISA
Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA or cause or permit to occur an ERISA Event to the extent such ERISA Event
could reasonably be expected to have a Material Adverse Effect.
6.10 FINANCIAL COVENANTS. Borrower shall not breach or fail to comply
with any of the Financial Covenants.
6.11 HAZARDOUS MATERIALS. No Credit Party shall cause or permit a
Release of any Hazardous Material on, at, in, under, above, to, from or about
any of the Real Estate where such Release would (a) violate in any respect, or
form the basis for any Environmental Liabilities under, any Environmental Laws
or Environmental Permits or (b) otherwise adversely impact the value or
marketability of any of the Real Estate or any of the Collateral, other than
such violations or Environmental Liabilities or impact that could not reasonably
be expected to have a Material Adverse Effect.
6.12 SALE-LEASEBACKS. No Credit Party shall engage in any
sale-leaseback, synthetic lease or similar transaction involving any of its
assets.
6.13 CANCELLATION OF INDEBTEDNESS. No Credit Party shall cancel any
claim or debt owing to it, except for reasonable consideration negotiated on an
arm's-length basis and in the ordinary course of its business consistent with
past practices.
6.14 RESTRICTED PAYMENTS. No Credit Party shall make any Restricted
Payment, except (a) dividends and distributions by Subsidiaries of Borrower paid
to Borrower, (b) employee loans permitted under SECTION 6.4(B), (c) payments of
management fees pursuant to the Administrative Services Agreements, (d) payments
of service fees pursuant to the Sales and Marketing Agreements, (e) sale of
products pursuant to the Supply Agreement, (f) distributions by the Borrower to
each member of
43
Borrower in an aggregate amount in respect of any fiscal year equal to its share
of 42.5% of the income of Borrower and its consolidated Subsidiaries, and (g)
purchases of the Stock of Borrower held by Waldensian with the proceeds from Put
Option Debt which is incurred in accordance with SECTION 6.3(A)(V) pursuant to
and on the terms set forth in the Put Option Agreement; provided, that (i) in
the case of CLAUSES (B) and (G) no Default or Event of Default has occurred and
is continuing or would result after giving effect to any Restricted Payment and
(ii) the timing of the payments referred to in CLAUSES (B) and (G) above shall
be set at dates that permit the delivery of Financial Statements necessary to
determine current compliance with the Financial Covenants prior to each such
payment.
6.15 CHANGE OF CORPORATE NAME OR LOCATION; CHANGE OF FISCAL YEAR. No
Credit Party shall (a) change its name as it appears in official filings in the
state of its incorporation or other organization, (b) change its warehouses or
locations at which Collateral is held or stored, (c) change the type of entity
that it is, (d) change its organization identification number, if any, issued by
its state of incorporation or other organization, or (e) change its state of
incorporation or organization, in each case without at least 30 days prior
written notice to Agent and after Agent's written acknowledgment that any
reasonable action requested by Agent in connection therewith, including to
continue the perfection of any Liens in favor of Agent, on behalf of Lenders, in
any Collateral, has been completed or taken which acknowledgment Agent shall
promptly give after all such actions have been taken to its satisfaction, and
PROVIDED that any such new location shall be in the continental United States.
No Credit Party shall change its Fiscal Year. No Credit Party shall change its
chief executive offices, principal place of business, or location of its records
concerning the Collateral without at least five (5) days prior written notice to
the Agent, provided that any such new location shall be in the continental
United States.
6.16 NO IMPAIRMENT OF INTERCOMPANY TRANSFERS. No Credit Party shall
directly or indirectly enter into or become bound by any agreement, instrument,
indenture or other obligation (other than this Agreement and the other Loan
Documents) that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or distributions
or the making or repayment of intercompany loans by a Subsidiary of Borrower to
Borrower.
6.17 NO SPECULATIVE TRANSACTIONS. No Credit Party shall engage in any
transaction involving commodity options, futures contracts or similar
transactions, except interest swaps.
6.18 LEASES; REAL ESTATE PURCHASES. No Credit Party shall enter into
any operating lease for Equipment or Real Estate, if the aggregate of all such
operating lease payments payable in any year for all Credit Parties on a
consolidated basis would exceed $150,000. No Credit Party shall purchase a fee
simple ownership interest in Real Estate without the prior written consent of
Agent.
6.19 CHANGES RELATING TO MATERIAL CONTRACTS.
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No Credit Party shall change or amend the terms of the Contribution
Agreement, the Limited Liability Company Agreement of the Borrower, the Put
Option Agreement, the Supply Agreement, the Administrative Services Agreement or
the Sales and Marketing Agreement without the prior written consent of the
Agent, which consent, with respect to amendments which complies with the
provisions in SECTION 6.4, shall not be unreasonably withheld.
7. TERM
7.1 TERMINATION. The financing arrangements contemplated hereby shall
be in effect until the Commitment Termination Date, and the Loans and all other
Obligations shall be automatically due and payable in full on such date.
7.2 SURVIVAL OF OBLIGATIONS UPON TERMINATION OF FINANCING
ARRANGEMENTS. Except as otherwise expressly provided for in the Loan Documents,
no termination or cancellation (regardless of cause or procedure) of any
financing arrangement under this Agreement shall in any way affect or impair the
obligations, duties and liabilities of the Credit Parties or the rights of Agent
and Lenders relating to any unpaid portion of the Loans or any other
Obligations, due or not due, liquidated, contingent or unliquidated or any
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Commitment Termination
Date. Except as otherwise expressly provided herein or in any other Loan
Document, all undertakings, agreements, covenants, warranties and
representations of or binding upon the Credit Parties, and all rights of Agent
and each Lender, all as contained in the Loan Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; PROVIDED, that the
provisions of SECTION 11, the payment obligations under SECTIONS 1.15 AND 1.16,
and the indemnities contained in the Loan Documents shall survive the
Termination Date.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events (regardless of the reason therefor) shall constitute an "EVENT
OF DEFAULT" hereunder:
(a) Borrower (i) fails to make any payment of the Loans when due and
payable, (ii) fails to make any payment of interest on, or Fees owing with
respect to, any Loans within two (2) Business Days after the same shall become
due and payable; or (iii) fails to pay or reimburse Agent or Lenders for any
expense reimbursable hereunder or under any other Loan Document within 10 days
following Agent's demand for such reimbursement or payment of expenses.
45
(b) Any Credit Party fails or neglects to perform, keep or observe
any of the provisions of Sections 1.4, 1.8, 5.4(a) or 6, or any of the
provisions set forth in Annexes C or G, respectively.
(c) Borrower fails or neglects to perform, keep or observe any of the
provisions of SECTION 4 or any provisions set forth in Annexes E or F,
respectively, and the same shall remain unremedied for 3 Business Days or more.
(d) Any Credit Party fails or neglects to perform, keep or observe
any other provision of this Agreement or of any of the other Loan Documents
(other than any provision embodied in or covered by any other clause of this
SECTION 8.1) and the same shall remain unremedied for 30 days or more.
(e) A default or breach occurs under any other agreement, document or
instrument to which any Credit Party is a party that is not cured within any
applicable grace period therefor, and such default or breach (i) involves the
failure to make any payment when due in respect of any Indebtedness or
Guaranteed Indebtedness (other than the Obligations) of any Credit Party in
excess of $100,000 in the aggregate (including (x) undrawn committed or
available amounts and (y) amounts owing to all creditors under any combined or
syndicated credit arrangements), or (ii) causes, or permits any holder of such
Indebtedness or Guaranteed Indebtedness or a trustee to cause, Indebtedness or
Guaranteed Indebtedness or a portion thereof in excess of $100,000 in the
aggregate to become due prior to its stated maturity or prior to its regularly
scheduled dates of payment, or cash collateral to be demanded in respect
thereof, in each case, regardless of whether such default is waived, or such
right is exercised, by such holder or trustee.
(f) Any information contained in any Borrowing Base Certificate is
untrue or incorrect in any respect, or any representation or warranty herein or
in any Loan Document or in any written statement, report, financial statement or
certificate (other than a Borrowing Base Certificate) made or delivered to Agent
or any Lender by any Credit Party is untrue or incorrect in any material respect
as of the date when made or deemed made.
(g) Assets of any Credit Party with a fair market value of $100,000
or more are attached, seized, levied upon or subjected to a writ or distress
warrant, or come within the possession of any receiver, trustee, custodian or
assignee for the benefit of creditors of any Credit Party and such condition
continues for 30 days or more.
(h) A case or proceeding is commenced against any Credit Party
seeking a decree or order in respect of such Credit Party (i) under the
Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) for such Credit Party or for any
substantial part of any such Credit Party's assets, or (iii) ordering the
winding-up or liquidation of the affairs of such Credit Party, and such case or
proceeding shall remain undismissed or unstayed for 60 days or more or a decree
46
or order granting the relief sought in such case or proceeding by a court of
competent jurisdiction.
(i) Any Credit Party (i) files a petition seeking relief under the
Bankruptcy Code or any other applicable federal, state or foreign bankruptcy or
other similar law, (ii) consents to or fails to contest in a timely and
appropriate manner to the institution of proceedings thereunder or to the filing
of any such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee or sequestrator (or similar
official) for such Credit Party or for any substantial part of any such Credit
Party's assets, (iii) makes an assignment for the benefit of creditors, or (iv)
takes any action in furtherance of any of the foregoing, or (v) admits in
writing its inability to, or is generally unable to, pay its debts as such debts
become due.
(j) A final judgment or judgments for the payment of money in excess
of $100,000 in the aggregate at any time are outstanding against one or more of
the Credit Parties and the same are not, within 30 days after the entry thereof,
discharged or execution thereof stayed or bonded pending appeal, or such
judgments are not discharged prior to the expiration of any such stay.
(k) Any material provision of any Loan Document for any reason ceases
to be valid, binding and enforceable in accordance with its terms (or any Credit
Party shall challenge the enforceability of any Loan Document or shall assert in
writing, or engage in any action or inaction based on any such assertion, that
any provision of any of the Loan Documents has ceased to be or otherwise is not
valid, binding and enforceable in accordance with its terms), or any Lien
created under any Loan Document ceases to be a valid and perfected first
priority Lien (except as otherwise permitted herein or therein) in any of the
Collateral purported to be covered thereby.
(l) Any Change of Control occurs.
(m) Any default or breach by Borrower occurs and is continuing under
any of the following agreements or any of the following agreements shall be
terminated for any reason: (i) the Administrative Services Agreement, (ii) the
Supply Agreement or (iii) the Sales and Marketing Agreement; PROVIDED, HOWEVER,
that the termination of any such agreement shall not constitute an Event of
Default if (x) within 30 days of such termination Borrower enters into an
agreement with another party to provide such services to the Borrower on the
substantially the same terms and conditions (including with respect to the
payment of fees and other costs and expenses) as the agreement being so
terminated or Borrower is able to provide such services by using current
employees or hiring additional employees, the cost of which shall not exceed the
costs under such agreement and (y) the termination and the lack of services
during such period does not cause a Material Adverse Effect and .
(n) Any default by any Credit Party, any Borrower Stockholder or any
other guarantor, grantor or pledgor in the observance or performance of any
covenant or
47
agreement contained in or incorporated by reference in any Collateral Document
and such default shall continue beyond the grace period, if any, provided in
such Collateral Document.
(o) Any of the representations or warranties made by Borrower,
Waldensian or Encompass in any Contribution Document is untrue or incorrect in
any material respect as of the date when made or deemed made.
8.2 REMEDIES.
(a) If any Default or Event of Default has occurred and is
continuing, Agent may (and at the written request of the Requisite Revolving
Lenders shall), without notice, suspend the Revolving Loan facility with respect
to additional Advances and/or the incurrence of additional Letter of Credit
Obligations, whereupon any additional Advances and additional Letter of Credit
Obligations shall be made or incurred in Agent's sole discretion (or in the sole
discretion of the Requisite Revolving Lenders, if such suspension occurred at
their direction) so long as such Default or Event of Default is continuing. If
any Default or Event of Default has occurred and is continuing, Agent may (and
at the written request of Requisite Lenders shall), without notice except as
otherwise expressly provided herein, increase the rate of interest applicable to
the Loans and the Letter of Credit Fees to the Default Rate.
(b) If any Event of Default has occurred and is continuing, Agent may
(and at the written request of the Requisite Lenders shall), without notice: (i)
terminate the Revolving Loan facility with respect to further Advances or the
incurrence of further Letter of Credit Obligations; (ii) declare all or any
portion of the Obligations, including all or any portion of any Loan to be
forthwith due and payable, and require that the Letter of Credit Obligations be
cash collateralized as provided in ANNEX B, all without presentment, demand,
protest or further notice of any kind, all of which are expressly waived by
Borrower and each other Credit Party; or (iii) exercise any rights and remedies
provided to Agent under the Loan Documents or at law or equity, including all
remedies provided under the Code; PROVIDED, that upon the occurrence of an Event
of Default specified in SECTIONS 8.1(H) OR (I), the Revolving Loan facility
shall be immediately terminated and all of the Obligations, including the
Revolving Loan, shall become immediately due and payable without declaration,
notice or demand by any Person.
8.3 WAIVERS BY CREDIT PARTIES. Except as otherwise provided for in
this Agreement or by applicable law, each Credit Party waives: (a) presentment,
demand and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by Agent on which any Credit Party may in any way be
liable, and hereby ratifies and confirms whatever Agent may do in this regard,
(b) all rights to notice and a hearing prior to Agent's taking possession or
control of, or to Agent's replevy, attachment or levy upon, the Collateral or
48
any bond or security that might be required by any court prior to allowing Agent
to exercise any of its remedies, and (c) the benefit of all valuation,
appraisal, marshaling and exemption laws.
9. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
9.1 Assignment and Participations.
(a) Subject to the terms of this SECTION 9.1, any Lender may make an
assignment to a Qualified Assignee of, or sale of participations in, at any time
or times, the Loan Documents, Loans, Letter of Credit Obligations and any
Commitment or any portion thereof or interest therein, including any Lender's
rights, title, interests, remedies, powers or duties thereunder. Any assignment
by a Lender shall: (i) require the consent of Agent (which consent shall not be
unreasonably withheld or delayed with respect to a Qualified Assignee) and the
execution of an assignment agreement (an "ASSIGNMENT AGREEMENT" substantially in
the form attached hereto as EXHIBIT 9.1(A) and otherwise in form and substance
reasonably satisfactory to, and acknowledged by, Agent; (ii) be conditioned on
such assignee Lender representing to the assigning Lender and Agent that it is
purchasing the applicable Loans to be assigned to it for its own account, for
investment purposes and not with a view to the distribution thereof; (iii) after
giving effect to any such partial assignment, the assignee Lender shall have
Commitments in an amount at least equal to $2,500,000 and the assigning Lender
shall have retained Commitments in an amount at least equal to $2,500,000; and
(iv) include a payment to Agent of an assignment fee of $3,500. In the case of
an assignment by a Lender under this SECTION 9.1, the assignee shall have, to
the extent of such assignment, the same rights, benefits and obligations as all
other Lenders hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby acknowledges
and agrees that any assignment shall give rise to a direct obligation of
Borrower to the assignee and that the assignee shall be considered to be a
"Lender". In all instances, each Lender's liability to make Loans hereunder
shall be several and not joint and shall be limited to such Lender's Pro Rata
Share of the applicable Commitment. In the event Agent or any Lender assigns or
otherwise transfers all or any part of the Obligations, Agent or any such Lender
shall so notify Borrower and Borrower shall, upon the request of Agent or such
Lender, execute new Notes in exchange for the Notes, if any, being assigned.
Notwithstanding the foregoing provisions of this SECTION 9.1(A), any Lender may
at any time pledge the Obligations held by it and such Lender's rights under
this Agreement and the other Loan Documents to a Federal Reserve Bank, and any
lender that is an investment fund may assign the Obligations held by it and such
Lender's rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor; PROVIDED, that no such
pledge to a Federal Reserve Bank shall release such Lender from such Lender's
obligations hereunder or under any other Loan Document.
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(b) Any participation by a Lender of all or any part of its
Commitments shall be made with the understanding that all amounts payable by
Borrower hereunder shall be determined as if that Lender had not sold such
participation, and that the holder of any such participation shall not be
entitled to require such Lender to take or omit to take any action hereunder
except actions directly affecting (i) any reduction in the principal amount of,
or interest rate or Fees payable with respect to, any Loan in which such holder
participates, (ii) any extension of the scheduled amortization of the principal
amount of any Loan in which such holder participates or the final maturity date
thereof, and (iii) any release of all or substantially all of the Collateral
(other than in accordance with the terms of this Agreement, the Collateral
Documents or the other Loan Documents). Solely for purposes of SECTIONS 1.13,
1.15, 1.16 and 9.8, Borrower acknowledges and agrees that a participation shall
give rise to a direct obligation of Borrower to the participant and the
participant shall be considered to be a "Lender"; PROVIDED, that the participant
shall not be entitled to receive any greater amount pursuant to Sections 1.13,
1.15, or 1.16 than the participating Lender would have been entitled to receive
in respect of the amount of the participation sold by such participating Lender
to such participant had no such participation occurred. Except as set forth in
the preceding sentence neither Borrower nor any other Credit Party shall have
any obligation or duty to any participant. Neither Agent nor any Lender (other
than the Lender selling a participation) shall have any duty to any participant
and may continue to deal solely with the Lender selling a participation as if no
such sale had occurred.
(c) Except as expressly provided in this SECTION 9.1, no Lender
shall, as between Borrower and that Lender, or Agent and that Lender, be
relieved of any of its obligations hereunder as a result of any sale,
assignment, transfer or negotiation of, or granting of participation in, all or
any part of the Loans, the Notes or other Obligations owed to such Lender.
(d) Each Credit Party executing this Agreement shall assist any
Lender holding at least 66 2/3% of the Commitments of all Lenders or if the
Commitments have been terminated at least 66 2/3% of the aggregate outstanding
amount of Loans, permitted to sell assignments or participations under this
SECTION 9.1 as reasonably required to enable the assigning or selling Lender to
effect any such assignment or participation, including the execution and
delivery of any and all agreements, notes and other documents and instruments as
shall be requested and the preparation of informational materials for, and the
participation of management in meetings with, potential assignees or
participants. Each Credit Party executing this Agreement shall certify the
correctness, completeness and accuracy of all descriptions of the Credit Parties
and their respective affairs contained in any selling materials provided by it
and all other information provided by it and included in such materials, except
that any Projections delivered by Borrower shall only be certified by Borrower
as having been prepared by Borrower in compliance with the representations
contained in SECTION 3.4(C).
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(e) A Lender may furnish any information concerning Credit Parties in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall obtain from assignees or participants confidentiality covenants
substantially equivalent to those contained in SECTION 11.8.
9.2 APPOINTMENT OF AGENT. GE Capital is hereby appointed to act on
behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this SECTION 9.2 are solely for the benefit of
Agent and Lenders and no Credit Party nor any other Person shall have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Credit Party or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and administrative
in nature and Agent shall not have, or be deemed to have, by reason of this
Agreement, any other Loan Document or otherwise a fiduciary relationship in
respect of any Lender. Except as expressly set forth in this Agreement and the
other Loan Documents, Agent shall not have any duty to disclose, and shall not
be liable for failure to disclose, any information relating to any Credit Party
or any of their respective Subsidiaries or any Account Debtor that is
communicated to or obtained by GE Capital or any of its Affiliates in any
capacity. Neither Agent nor any of its Affiliates nor any of their respective
officers, directors, employees, agents or representatives shall be liable to any
Lender for any action taken or omitted to be taken by it hereunder or under any
other Loan Document, or in connection herewith or therewith, except for damages
caused by its or their own gross negligence or willful misconduct.
If Agent shall request instructions from Requisite Lenders, Requisite
Revolving Lenders, or all affected Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any other Loan
Document, then Agent shall be entitled to refrain from such act or taking such
action unless and until Agent shall have received instructions from Requisite
Lenders, Requisite Revolving Lenders, or all affected Lenders, as the case may
be, and Agent shall not incur liability to any Person by reason of so
refraining. Agent shall be fully justified in failing or refusing to take any
action hereunder or under any other Loan Document (a) if such action would, in
the opinion of Agent, be contrary to law or the terms of this Agreement or any
other Loan Document, (b) if such action would, in the opinion of Agent, expose
Agent to Environmental Liabilities or (c) if Agent shall not first be
indemnified to its satisfaction against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such action.
Without limiting the foregoing, no Lender shall have any right of action
whatsoever against Agent as a result of Agent acting or refraining from acting
hereunder or under any other Loan Document in accordance with
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the instructions of Requisite Lenders, Requisite Revolving Lenders, or all
affected Lenders, as applicable.
9.3 AGENT'S RELIANCE, ETC. Neither Agent nor any of its Affiliates
nor any of their respective directors, officers, agents or employees shall be
liable for any action taken or omitted to be taken by it or them under or in
connection with this Agreement or the other Loan Documents, except for damages
caused by its or their own gross negligence or willful misconduct. Without
limiting the generality of the foregoing, Agent: (a) may treat the payee of any
Note as the holder thereof until Agent receives written notice of the assignment
or transfer thereof signed by such payee and in form reasonably satisfactory to
Agent; (b) may consult with legal counsel, independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts; (c) makes no warranty or representation to any
Lender and shall not be responsible to any Lender for any statements, warranties
or representations made in or in connection with this Agreement or the other
Loan Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Credit Party or to
inspect the Collateral (including the books and records) of any Credit Party;
(e) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
9.4 GE CAPITAL AND AFFILIATES. With respect to its Commitments
hereunder, GE Capital shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include GE Capital in its individual capacity. GE
Capital and its Affiliates may lend money to, invest in, and generally engage in
any kind of business with, any Credit Party, any of their Affiliates and any
Person who may do business with or own securities of any Credit Party or any
such Affiliate, all as if GE Capital were not Agent and without any duty to
account therefor to Lenders. GE Capital and its Affiliates may accept fees and
other consideration from any Credit Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders. GE
Capital has also purchased certain equity interests in Borrower. Each Lender
acknowledges the potential conflict of interest between GE Capital as a Lender
holding disproportionate interests in the Loans, GE Capital as Agent and GE
Capital as a Borrower Stockholder.
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9.5 LENDER CREDIT DECISION. Each Lender acknowledges that it has,
independently and without reliance upon Agent or any other Lender and based on
the Financial Statements referred to in SECTION 3.4(A) and such other documents
and information as it has deemed appropriate, made its own credit and financial
analysis of the Credit Parties and its own decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without
reliance upon Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement. Each
Lender acknowledges the potential conflict of interest of each other Lender as a
result of Lenders holding disproportionate interests in the Loans, and expressly
consents to, and waives any claim based upon, such conflict of interest.
9.6 INDEMNIFICATION. Lenders agree to indemnify Agent (to the extent
not reimbursed by Credit Parties and without limiting the obligations of
Borrower hereunder), ratably according to their respective Pro Rata Shares, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by, or asserted against Agent
in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted to be taken by Agent in connection
therewith; PROVIDED, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any out-of-pocket
expenses (including reasonable counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Credit Parties.
9.7 SUCCESSOR AGENT. Agent may resign at any time by giving not less
than 30 days' prior written notice thereof to Lenders and Borrower. Upon any
such resignation, the Requisite Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within 30 days after
the resigning Agent's giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a commercial bank or
financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, within 30 days after the
date such notice of resignation was given by the resigning Agent, such
resignation shall become effective and the Requisite Lenders shall thereafter
perform all the duties of Agent hereunder until
53
such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; PROVIDED that such approval shall not be
required if a Default or an Event of Default has occurred and is continuing.
Upon the acceptance of any appointment as Agent hereunder by a successor Agent,
such successor Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the resigning Agent. Upon the earlier of the
acceptance of any appointment as Agent hereunder by a successor Agent or the
effective date of the resigning Agent's resignation, the resigning Agent shall
be discharged from its duties and obligations under this Agreement and the other
Loan Documents, except that any indemnity rights or other rights in favor of
such resigning Agent shall continue. After any resigning Agent's resignation
hereunder, the provisions of this SECTION 9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was acting as Agent under
this Agreement and the other Loan Documents.
9.8 SETOFF AND SHARING OF PAYMENTS. In addition to any rights now or
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default
and subject to SECTION 9.9(F), each Lender is hereby authorized at any time or
from time to time, without notice to any Credit Party or to any other Person,
any such notice being hereby expressly waived, to offset and to appropriate and
to apply any and all balances held by it at any of its offices for the account
of any Credit Party (regardless of whether such balances are then due to any
Credit Party) and any other properties or assets at any time held or owing by
that Lender or that holder to or for the credit or for the account of any Credit
Party against and on account of any of the Obligations that are not paid when
due. Each Lender agrees promptly to notify the applicable Credit Party after any
such set-off and application made by such Lender; PROVIDED, HOWEVER, that the
failure to give such notice shall not affect the validity of such set-off and
application. Any Lender exercising a right of setoff or otherwise receiving any
payment on account of the Obligations in excess of its Pro Rata Share thereof
shall purchase for cash (and the other Lenders or holders shall sell) such
participations in each such other Lender's or holder's Pro Rata Share of the
Obligations as would be necessary to cause such Lender to share the amount so
offset or otherwise received with each other Lender or holder in accordance with
their respective Pro Rata Shares, (other than offset rights exercised by any
Lender with respect to SECTIONS 1.13, 1.15 OR 1.16). Each Credit Party agrees,
to the fullest extent permitted by law, that (a) any Lender may exercise its
right to offset with respect to amounts in excess of its Pro Rata Share of the
Obligations and may sell participations in such amounts so offset to other
Lenders and holders and (b) any Lender so purchasing a participation in the
Loans made or other Obligations held by other Lenders or holders may exercise
all rights of offset, bankers' lien, counterclaim or similar rights with respect
to such participation as fully as if such Lender or holder were a direct holder
of the Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the offset amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of offset, the purchase of
54
participations by that Lender shall be rescinded and the purchase price restored
without interest.
9.9 Advances; Payments; Non-Funding Lenders; Information; Actions in
Concert.
(a) ADVANCES; PAYMENTS.
(i) Agent shall notify Revolving Lenders, promptly after
receipt of a Notice of Revolving Advance and in any event prior to 1:00 p.m.
(New York time) on the date such Notice of Revolving Advance is received, by
telecopy, telephone or other similar form of transmission. Each Revolving Lender
shall make the amount of such Lender's Pro Rata Share of such Revolving Credit
Advance available to Agent in same day funds by wire transfer to Agent's account
as set forth in ANNEX H not later than 3:00 p.m. (New York time) on the
requested funding date, in the case of an Index Rate Loan and not later than
11:00 a.m. (New York time) on the requested funding date in the case of a LIBOR
Loan. After receipt of such wire transfers (or, in the Agent's sole discretion,
before receipt of such wire transfers), subject to the terms hereof, Agent shall
make the requested Revolving Credit Advance to Borrower. All payments by each
Revolving Lender shall be made without setoff, counterclaim or deduction of any
kind.
(ii) On the 2nd Business Day of each calendar week or more
frequently at Agent's election (each, a "SETTLEMENT DATE"), Agent shall advise
each Lender by telephone, or telecopy of the amount of such Lender's Pro Rata
Share of principal, interest and Fees paid for the benefit of Lenders with
respect to each applicable Loan. Provided that each Lender has funded all
payments and Advances required to be made by it and purchased all participations
required to be purchased by it under this Agreement and the other Loan Documents
as of such Settlement Date, Agent shall pay to each Lender such Lender's Pro
Rata Share of principal, interest and Fees paid by Borrower since the previous
Settlement Date for the benefit of such Lender on the Loans held by it. To the
extent that any Lender (a "NON-FUNDING LENDER") has failed to fund all such
payments and Advances or failed to fund the purchase of all such participations,
Agent shall be entitled to set off the funding short-fall against that
Non-Funding Lender's Pro Rata Share of all payments received from Borrower. Such
payments shall be made by wire transfer to such Lender's account (as specified
by such Lender in ANNEX H or the applicable Assignment Agreement) not later than
2:00 p.m. (New York time) on the next Business Day following each Settlement
Date.
(b) AVAILABILITY OF LENDER'S PRO RATA SHARE. Agent may assume that
each Revolving Lender will make its Pro Rata Share of each Revolving Credit
Advance available to Agent on each funding date. If such Pro Rata Share is not,
in fact, paid to Agent by such Revolving Lender when due, Agent will be entitled
to recover such amount on demand from such Revolving Lender without setoff,
counterclaim or deduction of any kind. If any Revolving Lender fails to pay the
amount of its Pro Rata Share forthwith upon Agent's demand, Agent shall promptly
notify Borrower and
55
Borrower shall immediately repay such amount to Agent. Nothing in this SECTION
9.9(B) or elsewhere in this Agreement or the other Loan Documents shall be
deemed to require Agent to advance funds on behalf of any Revolving Lender or to
relieve any Revolving Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights that Borrower may have against any
Revolving Lender as a result of any default by such Revolving Lender hereunder.
To the extent that Agent advances funds to Borrower on behalf of any Revolving
Lender and is not reimbursed therefor on the same Business Day as such Advance
is made, Agent shall be entitled to retain for its account all interest accrued
on such Advance until reimbursed by the applicable Revolving Lender.
(c) RETURN OF PAYMENTS.
(i) If Agent pays an amount to a Lender under this Agreement
in the belief or expectation that a related payment has been or will be received
by Agent from Borrower and such related payment is not received by Agent, then
Agent will be entitled to recover such amount from such Lender on demand without
setoff, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received
by Agent under this Agreement must be returned to Borrower or paid to any other
Person pursuant to any insolvency law or otherwise, then, notwithstanding any
other term or condition of this Agreement or any other Loan Document, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without setoff,
counterclaim or deduction of any kind.
(d) NON-FUNDING LENDERS. The failure of any Non-Funding Lender to
make any Revolving Credit Advance or any payment required by it hereunder shall
not relieve any other Lender (each such other Revolving Lender, an "OTHER
LENDER") of its obligations to make such Advance or purchase such participation
on such date, but neither any Other Lender nor Agent shall be responsible for
the failure of any Non-Funding Lender to make an Advance, purchase a
participation or make any other payment required hereunder. Notwithstanding
anything set forth herein to the contrary, a Non-Funding Lender shall not have
any voting or consent rights under or with respect to any Loan Document or
constitute a "Lender" or a "Revolving Lender" (or be included in the calculation
of "Requisite Lenders" or "Requisite Revolving Lenders" hereunder) for any
voting or consent rights under or with respect to any Loan Document. At
Borrower's request, (i) Agent shall have the right (but shall have no
obligation) (ii) or a Person reasonably acceptable to Agent shall have the
right, to purchase from any Non-Funding Lender, and each Non-Funding Lender
agrees that it shall, at Agent's request, sell and assign to Agent or such
Person, all of the Commitments of that Non-Funding Lender for an amount equal to
the principal balance of all Loans held by such Non-Funding Lender
56
and all accrued interest and fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Dissemination of Information. Agent shall use reasonable efforts
to provide Lenders with any notice of Default or Event of Default received by
Agent from, or delivered by Agent to, any Credit Party, with notice of any Event
of Default of which Agent has actually become aware and with notice of any
action taken by Agent following any Event of Default; provided, that Agent shall
not be liable to any Lender for any failure to do so, except to the extent that
such failure is attributable to Agent's gross negligence or willful misconduct.
Lenders acknowledge that Borrower is required to provide Financial Statements
and Collateral Reports to Lenders in accordance with ANNEXES E and F hereto and
agree that Agent shall have no duty to provide the same to Lenders.
(f) ACTIONS IN CONCERT. Anything in this Agreement to the contrary
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of setoff) without first
obtaining the prior written consent of Agent and Requisite Lenders, it being the
intent of Lenders that any such action to protect or enforce rights under this
Agreement and the Notes shall be taken in concert and at the direction or with
the consent of Agent or Requisite Lenders.
10. SUCCESSORS AND ASSIGNS
10.1 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan
Documents shall be binding on and shall inure to the benefit of each Credit
Party, Agent, Lenders and their respective successors and assigns (including, in
the case of any Credit Party, a debtor-in-possession on behalf of such Credit
Party), except as otherwise provided herein or therein. No Credit Party may
assign, transfer, hypothecate or otherwise convey its rights, benefits,
obligations or duties hereunder or under any of the other Loan Documents without
the prior express written consent of Agent and Lenders. Any such purported
assignment, transfer, hypothecation or other conveyance by any Credit Party
without the prior express written consent of Agent and Lenders shall be void.
The terms and provisions of this Agreement are for the purpose of defining the
relative rights and obligations of each Credit Party, Agent and Lenders with
respect to the transactions contemplated hereby and no Person shall be a third
party beneficiary of any of the terms and provisions of this Agreement or any of
the other Loan Documents.
11. MISCELLANEOUS
11.1 COMPLETE AGREEMENT; MODIFICATION OF AGREEMENT. The Loan Documents
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in SECTION 11.2. Any letter of interest, commitment letter, or fee letter
(other than the GE Capital Fee Letter) or confidentiality agreement, if any,
between any Credit Party and
57
Agent or any Lender or any of their respective Affiliates, predating this
Agreement and relating to a financing of substantially similar form, purpose or
effect shall be superseded by this Agreement.
11.2 Amendments and Waivers.
(a) Except for actions expressly permitted to be taken by Agent, no
amendment, modification, termination or waiver of any provision of this
Agreement or any other Loan Document, or any consent to any departure by any
Credit Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by Agent and Borrower, and by Requisite Lenders, Requisite
Revolving Lenders, or all affected Lenders, as applicable. Except as set forth
in CLAUSES (B) AND (C) below, all such amendments, modifications, terminations
or waivers requiring the consent of any Lenders shall require the written
consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent
with respect to any provision of this Agreement that increases the percentage
advance rates set forth in the definition of the Borrowing Base, or that makes
less restrictive the nondiscretionary criteria for exclusion from Eligible
Accounts and Eligible Inventory set forth in SECTIONS 1.6 AND 1.7, shall be
effective unless the same shall be in writing and signed by Agent, Requisite
Revolving Lenders and Borrower. No amendment, modification, termination or
waiver of or consent with respect to any provision of this Agreement that waives
compliance with the conditions precedent set forth in SECTION 2.2 to the making
of any Loan or the incurrence of any Letter of Credit Obligations shall be
effective unless the same shall be in writing and signed by Agent, Requisite
Revolving Lenders and Borrower. Notwithstanding anything contained in this
Agreement to the contrary, no waiver or consent with respect to any Default or
any Event of Default shall be effective for purposes of the conditions precedent
to the making of Loans or the incurrence of Letter of Credit Obligations set
forth in SECTION 2.2 unless the same shall be in writing and signed by Agent,
Requisite Revolving Lenders and Borrower.
(c) No amendment, modification, termination or waiver shall, unless
in writing and signed by Agent and each Lender directly affected thereby: (i)
increase the principal amount of any Lender's Commitment (which action shall be
deemed only to affect those Lenders whose Commitments are increased and may be
approved by Requisite Lenders, including those lenders whose Commitments are
increased); (ii) reduce the principal of, rate of interest on or Fees payable
with respect to any Loan or Letter of Credit Obligations of any affected Lender;
(iii) extend any scheduled payment date (other than payment dates of mandatory
prepayments under SECTION 1.3(B)(II)-(IV)) or final maturity date of the
principal amount of any Loan of any affected Lender; (iv) waive, forgive, defer,
extend or postpone any payment of interest or Fees as to any affected Lender;
(v) except as otherwise permitted herein or in the other Loan Documents,
release, or permit any Credit Party to sell or otherwise dispose of, any
Collateral with a value exceeding $1,000,000 in the aggregate (which action
shall be
58
deemed to directly affect all Lenders); (vi) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Loans that shall
be required for Lenders or any of them to take any action hereunder; and (vii)
amend or waive this SECTION 11.2 or the definitions of the terms "Requisite
Lenders" or "Requisite Revolving Lenders" insofar as such definitions affect the
substance of this SECTION 11.2. Furthermore, no amendment, modification,
termination or waiver affecting the rights or duties of Agent or L/C Issuer
under this Agreement or any other Loan Document shall be effective unless in
writing and signed by Agent or L/C Issuer, as the case may be, in addition to
Lenders required hereinabove to take such action. Each amendment, modification,
termination or waiver shall be effective only in the specific instance and for
the specific purpose for which it was given. No amendment, modification,
termination or waiver shall be required for Agent to take additional Collateral
pursuant to any Loan Document. No amendment, modification, termination or waiver
of any provision of any Note shall be effective without the written concurrence
of the holder of that Note. No notice to or demand on any Credit Party in any
case shall entitle such Credit Party or any other Credit Party to any other or
further notice or demand in similar or other circumstances. Any amendment,
modification, termination, waiver or consent effected in accordance with this
SECTION 11.2 shall be binding upon each holder of the Notes at the time
outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "PROPOSED CHANGE"):
(i) requiring the consent of all affected Lenders, the consent
of Requisite Lenders is obtained, but the consent of other Lenders whose consent
is required is not obtained (any such Lender whose consent is not obtained as
described in this CLAUSE (I) and in CLAUSES (II), (III) AND (IV) below being
referred to as a "Non-Consenting Lender"),
(ii) requiring the consent of Requisite Revolving Lenders, the
consent of Revolving Lenders holding 51% or more of the aggregate Revolving Loan
Commitments is obtained, but the consent of Requisite Revolving Lenders is not
obtained, or
(iii) requiring the consent of Requisite Lenders, the consent of
Lenders holding 51% or more of the aggregate Commitments is obtained, but the
consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request (i)
Agent shall have the right (but shall have no obligation) or (ii) a Person
reasonably acceptable to Agent shall have the right, to purchase from such
Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall,
upon Agent's request, sell and assign to Agent or such Person, all of the
Commitments of such Non-Consenting Lenders for an amount equal to the principal
balance of all Loans held by the Non-Consenting Lenders
59
and all accrued interest and Fees with respect thereto through the date of sale,
such purchase and sale to be consummated pursuant to an executed Assignment
Agreement.
(e) Upon payment in full in cash and performance of all of the
Obligations (other than indemnification Obligations), termination of the
Commitments and a release of all claims against Agent and Lenders, and so long
as no suits, actions proceedings, or claims are pending or threatened against
any Indemnified Person asserting any damages, losses or liabilities that are
Indemnified Liabilities, Agent shall deliver to Borrower termination statements,
mortgage releases and other documents necessary or appropriate to evidence the
termination of the Liens securing payment of the Obligations.
11.3 FEES AND EXPENSES. Borrower shall reimburse (i) Agent for all
reasonable fees, costs and expenses (including the reasonable fees and expenses
of all of its counsel, advisors, consultants and auditors) and (ii) Agent for
all reasonable fees, costs and expenses, including the reasonable fees, costs
and expenses of counsel or other advisors (including environmental and
management consultants and appraisers) incurred in connection with the
negotiation and preparation of the Loan Documents and incurred in connection
with:
(a) the forwarding to Borrower or any other Person on behalf of
Borrower by Agent of the proceeds of any Loan (including a wire transfer fee of
$25 per wire transfer);
(b) any amendment, modification or waiver of, or consent with respect
to, or termination of, any of the Loan Documents or Related Transactions
Documents or advice in connection with the administration of the Loans made
pursuant hereto or its rights hereunder or thereunder;
(c) any litigation, contest, dispute, suit, proceeding or action
(whether instituted by Agent, any Lender, Borrower or any other Person and
whether as a party, witness or otherwise) in any way relating to the Collateral,
any of the Loan Documents or any other agreement to be executed or delivered in
connection herewith or therewith, including any litigation, contest, dispute,
suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against Borrower or any other Person that
may be obligated to Agent by virtue of the Loan Documents, including any such
litigation, contest, dispute, suit, proceeding or action arising in connection
with any work-out or restructuring of the Loans during the pendency of one or
more Events of Default; PROVIDED that in the case of reimbursement of counsel
for Lenders other than Agent, such reimbursement shall be limited to one counsel
for all such Lenders; PROVIDED, further, that no Person shall be entitled to
reimbursement under this clause (c) in respect of any litigation, contest,
dispute, suit, proceeding or action to the extent any of the foregoing results
from such Person's gross negligence or willful misconduct;
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(d) any attempt to enforce any remedies of Agent or any Lender
against any or all of the Credit Parties or any other Person that may be
obligated to Agent or any Lender by virtue of any of the Loan Documents,
including any such attempt to enforce any such remedies in the course of any
work-out or restructuring of the Loans during the pendency of one or more Events
of Default; provided, that in the case of reimbursement of counsel for Lenders
other than Agent, such reimbursement shall be limited to one counsel for all
such Lenders;
(e) any workout or restructuring of the Loans during the pendency of
one or more Events of Default; and
(f) efforts to (i) monitor the Loans or any of the other Obligations,
(ii) evaluate, observe or assess any of the Credit Parties or their respective
affairs, and (iii) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Collateral;
including, as to each of CLAUSES (A) THROUGH (F) above, all reasonable
attorneys' and other professional and service providers' fees arising from such
services and other advice, assistance or other representation, including those
in connection with any appellate proceedings, and all reasonable expenses,
costs, charges and other fees incurred by such counsel and others in connection
with or relating to any of the events or actions described in this SECTION 11.3,
all of which shall be payable, on demand, by Borrower to Agent. Without limiting
the generality of the foregoing, such expenses, costs, charges and fees may
include: reasonable fees, costs and expenses of accountants, environmental
advisors, appraisers, investment bankers, management and other consultants and
paralegals; court costs and expenses; photocopying and duplication expenses;
court reporter fees, costs and expenses; long distance telephone charges; air
express charges; telegram or telecopy charges; secretarial overtime charges; and
expenses for travel, lodging and food paid or incurred in connection with the
performance of such legal or other advisory services.
11.4 NO WAIVER. Agent's or any Lender's failure, at any time or times,
to require strict performance by the Credit Parties of any provision of this
Agreement or any other Loan Document shall not waive, affect or diminish any
right of Agent or such Lender thereafter to demand strict compliance and
performance herewith or therewith. Any suspension or waiver of an Event of
Default shall not suspend, waive or affect any other Event of Default whether
the same is prior or subsequent thereto and whether the same or of a different
type. Subject to the provisions of SECTION 11.2, none of the undertakings,
agreements, warranties, covenants and representations of any Credit Party
contained in this Agreement or any of the other Loan Documents and no Default or
Event of Default by any Credit Party shall be deemed to have been suspended or
waived by Agent or any Lender, unless such waiver or suspension is by an
instrument in writing signed by an officer of or other authorized employee of
Agent and the applicable required Lenders and directed to Borrower specifying
such suspension or waiver.
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11.5 REMEDIES. Agent's and Lenders' rights and remedies under this
Agreement shall be cumulative and nonexclusive of any other rights and remedies
that Agent or any Lender may have under any other agreement, including the other
Loan Documents, by operation of law or otherwise. Recourse to the Collateral
shall not be required.
11.6 SEVERABILITY. Wherever possible, each provision of this Agreement
and the other Loan Documents shall be interpreted in such a manner as to be
effective and valid under applicable law, but if any provision of this Agreement
or any other Loan Document shall be prohibited by or invalid under applicable
law, such provision shall be ineffective only to the extent of such prohibition
or invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement or such other Loan Document.
11.7 CONFLICT OF TERMS. Except as otherwise provided in this Agreement
or any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement
conflicts with any provision in any of the other Loan Documents, the provision
contained in this Agreement shall govern and control.
11.8 CONFIDENTIALITY. Agent and each Lender agree to use commercially
reasonable efforts (equivalent to the efforts Agent or such Lender applies to
maintain the confidentiality of its own confidential information), and to cause
Persons employed or engaged by them, to maintain as confidential all
confidential information provided to them by the Credit Parties and designated
as confidential for a period of 5 years following receipt thereof, except that
Agent and each Lender may disclose such information (a) to Persons employed or
engaged by Agent or such Lender; (b) to any bona fide assignee or participant or
potential assignee or participant that has agreed to comply with the covenant
contained in this SECTION 11.8 (and any such bona fide assignee or participant
or potential assignee or participant may disclose such information to Persons
employed or engaged by them as described in CLAUSE (A) ABOVE); (C) as required
or requested by any Governmental Authority or reasonably believed by Agent or
such Lender to be compelled by any court decree, subpoena or legal or
administrative order or process and Agent or such Lender shall, to the extent
permitted by law, give notice thereof to Borrower; (d) as, on the advise of
Agent's or such Lender's counsel, is required by law; (e) in connection with the
exercise of any right or remedy under the Loan Documents or in connection with
any Litigation to which Agent or such Lender is a party; or (f) that ceases to
be confidential through no fault of Agent or any Lender.
11.9 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THE LOAN DOCUMENTS AND THE OBLIGATIONS SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
62
THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN THAT STATE AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS
LOCATED IN XXX XXXX XXXXXX, XXXX XX XXX XXXX, XXX XXXX SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE CREDIT
PARTIES, AGENT AND LENDERS PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT AGENT, LENDERS AND THE CREDIT
PARTIES ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A
COURT LOCATED OUTSIDE OF NEW YORK COUNTY AND; PROVIDED, FURTHER THAT NOTHING IN
THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE AGENT FROM BRINGING SUIT
OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF AGENT. EACH PARTY HERETO EXPRESSLY SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH CREDIT PARTY HEREBY WAIVES ANY OBJECTION THAT SUCH CREDIT
PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM
NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE
RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HERETO HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINTS AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH PARTY AT
THE ADDRESS SET FORTH IN ANNEX I OF THIS AGREEMENT AND THAT SERVICE SO MADE
SHALL BE DEEMED COMPLETED UPON THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT
THEREOF OR 3 DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS, PROPER POSTAGE
PREPAID.
11.10 NOTICES. Except as otherwise provided herein, whenever it is
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon any of the
parties by any other parties, or whenever any of the parties desires to give or
serve upon any other parties any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and 3 Business
Days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (b) upon
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transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this SECTION
11.10); (c) 1 Business Day after deposit with a reputable overnight courier with
all charges prepaid or (d) when delivered, if hand-delivered by messenger, all
of which shall be addressed to the party to be notified and sent to the address
or facsimile number indicated in ANNEX I or to such other address (or facsimile
number) as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower or Agent) designated in Annex I to receive copies
shall in no way adversely affect the effectiveness of such notice, demand,
request, consent, approval, declaration or other communication.
11.11 SECTION TITLES. The Section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
11.12 COUNTERPARTS. This Agreement may be executed in any number of
separate counterparts, each of which shall collectively and separately
constitute one agreement.
11.13 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE, AMONG AGENT, LENDERS AND ANY CREDIT PARTY ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH, THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.
11.14 PRESS RELEASES AND RELATED MATTERS. Each Credit Party executing
this Agreement agrees that neither it nor its Affiliates will in the future
issue any press releases or other public disclosure using the name of GE Capital
or its affiliates or referring to this Agreement, the other Loan Documents or
the Related Transactions Documents without at least 2 Business Days' prior
notice to GE Capital and without the
64
prior written consent of GE Capital unless (and only to the extent that) such
Credit Party or Affiliate is required to do so under law and then, in any event,
such Credit Party or Affiliate will consult with GE Capital before issuing such
press release or other public disclosure. Each Credit Party consents to the
publication by Agent or any Lender of a tombstone or similar advertising
material relating to the financing transactions contemplated by this Agreement.
Agent or such Lender shall provide a draft of any such tombstone or similar
advertising material to each Credit Party for review and comment prior to the
publication thereof. Agent reserves the right to provide to industry trade
organizations information necessary and customary for inclusion in league table
measurements.
11.15 REINSTATEMENT. This Agreement shall remain in full force and
effect and continue to be effective should any petition be filed by or against
Borrower for liquidation or reorganization, should Borrower become insolvent or
make an assignment for the benefit of any creditor or creditors or should a
receiver or trustee be appointed for all or any significant part of Borrower's
assets, and shall continue to be effective or to be reinstated, as the case may
be, if at any time payment and performance of the Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
11.16 ADVICE OF COUNSEL. Each of the parties represents to each other
party hereto that it has discussed this Agreement and, specifically, the
provisions of SECTIONS 11.9 AND 11.13, with its counsel.
11.17 NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first written above.
BORROWER
ALBAHEALTH LLC
By:/s/ Xxx Xxxxxx
-------------------------------------
Name:___________________________________
Title:__________________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
By: /s/
-------------------------------------
Duly Authorized Signatory
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ANNEX A (RECITALS)
TO
CREDIT AGREEMENT
DEFINITIONS
Capitalized terms used in the Loan Documents shall have (unless
otherwise provided elsewhere in the Loan Documents) the following respective
meanings and all references to Sections, Exhibits, Schedules or Annexes in the
following definitions shall refer to Sections, Exhibits, Schedules or Annexes of
or to the Agreement:
"ACCOUNT DEBTOR" means any Person who may become obligated to any
Credit Party under, with respect to, or on account of, an Account, Chattel Paper
or General Intangibles (including a payment intangible).
"ACCOUNTING CHANGES" has the meaning ascribed thereto in ANNEX G.
"ACCOUNTS" means all "accounts," as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, including (a) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper or Instruments), (including
any such obligations that may be characterized as an account or contract right
under the Code), (b) all of each Credit Party's rights in, to and under all
purchase orders or receipts for goods or services, (c) all of each Credit
Party's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods), (d) all rights
to payment due to any Credit Party for property sold, leased, licensed, assigned
or otherwise disposed of, for a policy of insurance issued or to be issued, for
a secondary obligation incurred or to be incurred, for energy provided or to be
provided, for the use or hire of a vessel under a charter or other contract,
arising out of the use of a credit card or charge card, or for services rendered
or to be rendered by such Credit Party or in connection with any other
transaction (whether or not yet earned by performance on the part of such Credit
Party), (e) all healthcare insurance receivables, and (f) all collateral
security of any kind, now or hereafter in existence, given by any Account Debtor
or other Person with respect to any of the foregoing.
"ACTIVATION EVENT" and "Activation Notice" have the meanings ascribed
thereto in ANNEX C.
"ADVANCE" means any Revolving Credit Advance.
"ADMINISTRATIVE SERVICES AGREEMENT" means that certain General
Administrative Services Agreement, dated as of September 6, 2002 by and between
Waldensian and the Borrower, as in effect on the date hereof and as may be
amended
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with the consent of the Agent and upon the termination of the agreement with
Waldensian, any replacement agreement pursuant to which such services would be
provided to Borrower on substantially the same terms and conditions (including
with respect to the payment of fees, costs and expenses).
"AFFILIATE" means, with respect to any Person, (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, 5% or more of the Stock having ordinary voting
power in the election of directors of such Person, (b) each Person that
controls, is controlled by or is under common control with such Person, (c) each
of such Person's officers, directors, joint venturers and partners and (d) in
the case of Borrower, the immediate family members, spouses and lineal
descendants of individuals who are Affiliates of Borrower. For the purposes of
this definition, "CONTROL" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise; PROVIDED, HOWEVER, that the term "AFFILIATE" shall specifically
exclude Agent and each Lender.
"AGENT" means GE Capital in its capacity as Agent for Lenders or its
successor appointed pursuant to SECTION 9.7.
"AGREEMENT" has the meaning ascribed to it in the preamble to this
credit agreement.
"APPENDICES" has the meaning ascribed to it in the recitals to the
Agreement.
"APPLICABLE MARGINS" means collectively the Applicable Revolver Index
Margin, the Applicable Term Loan Index Margin, the Applicable Revolver LIBOR
Margin and the Applicable Term Loan LIBOR Margin.
"APPLICABLE REVOLVER INDEX MARGIN" means the per annum interest rate
margin from time to time in effect and payable in addition to the Index Rate
applicable to the Revolving Loan, as determined by reference to SECTION 1.5(A).
"APPLICABLE REVOLVER LIBOR MARGIN" means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Revolving Loan, as determined by reference to SECTION 1.5(A).
"APPLICABLE TERM LOAN INDEX MARGIN" means the per annum interest rate
from time to time in effect and payable in addition to the Index Rate applicable
to the Term Loan, as determined by reference to SECTION 1.5(A).
"APPLICABLE TERM LOAN LIBOR MARGIN" means the per annum interest rate
from time to time in effect and payable in addition to the LIBOR Rate applicable
to the Term Loan, as determined by reference to SECTION 1.5(A).
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"ASSIGNMENT AGREEMENT" has the meaning ascribed to it in SECTION
9.1(A).
"BANKRUPTCY CODE" means the provisions of Title 11 of the United States
Code, 11 U.S.C. xx.xx. 101 et sEQ.
"BLOCKED ACCOUNTS" has the meaning ascribed to it in ANNEX C.
"BORROWER" has the meaning ascribed thereto in the preamble to the
Agreement.
"BORROWER PLEDGE AGREEMENT" means the Pledge Agreement of even date
herewith executed by Borrower in favor of Agent, on behalf of itself and
Lenders, pledging all Stock of its Subsidiaries, if any.
"BORROWER STOCKHOLDERS" has the meaning ascribed thereto in the
recitals to the Agreement.
"BORROWER STOCKHOLDERS PLEDGE AGREEMENT" means the Pledge Agreement of
even date herewith executed by each of the Borrower Stockholders in favor of
Agent, on behalf of itself and Lenders, pledging all Stock of Borrower owned or
held by such Borrower Stockholder.
"BORROWING AVAILABILITY" means as of any date of determination the
lesser of (i) the Maximum Amount and (ii) the Borrowing Base, in each case, LESS
the sum of the Revolving Loan then outstanding; provided that an Overadvance in
accordance with SECTION 1.1(A)(III) may cause the Revolving Loan to exceed the
Borrowing Base by the amount of such permitted Overadvance.
"BORROWING BASE" means, as of any date of determination by Agent, from
time to time, an amount equal to the sum at such time of:
(a) 85% of the book value of Borrower's Eligible Accounts at such time;
(b) 50% of the book value of Borrower's Eligible Inventory valued at the
lower of cost (determined on a first-in, first-out basis) or market; and
in each case, less any Reserves established by Agent at such time.
"BORROWING BASE CERTIFICATE" means a certificate to be executed and
delivered from time to time by Borrower in the form attached to the Agreement as
EXHIBIT 4.1(B).
"BUSINESS DAY" means any day that is not a Saturday, a Sunday or a day
on which banks are required or permitted to be closed in the State of New York
and in reference to LIBOR Loans shall mean any such day that is also a LIBOR
Business Day.
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"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP; provided,
that Capital Expenditures shall not include, for purposes hereof, expenditures
of proceeds of insurance settlements, condemnation awards and other settlements
in respect of lost, destroyed, damaged or condemned assets, equipment or other
property to the extent such expenditures are made to replace or repair such
lost, destroyed, damaged or condemned assets, equipment or other property or
otherwise to acquire assets or properties useful in the business of Borrower.
"CAPITAL LEASE" means, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"CAPITAL LEASE OBLIGATION" means, with respect to any Capital Lease of
any Person, the amount of the obligation of the lessee thereunder that, in
accordance with GAAP, would appear on a balance sheet of such lessee in respect
of such Capital Lease.
"CASH COLLATERAL ACCOUNT" has the meaning ascribed to it ANNEX B.
"CASH EQUIVALENTS" has the meaning ascribed to it in ANNEX B.
"CASH MANAGEMENT SYSTEMS" has the meaning ascribed to it in SECTION
1.8.
"CHANGE OF CONTROL" means any event, transaction or occurrence as a
result of which (a) Waldensian and/or Encompass cease to own and control,
directly or through one or more of their respective Affiliates, all of the
economic and voting rights associated with ownership of at least 90% of the
outstanding capital Stock of all classes of Borrower on a fully diluted basis,
or (b) Borrower ceases to own and control all of the economic and voting rights
associated with all of the outstanding capital Stock of any of its Subsidiaries.
"CHARGES" means all federal, state, county, city, municipal, local,
foreign or other governmental taxes (including any interest, penalties or other
additions to tax that may become payable in respect thereof and taxes owed to
the PBGC at the time due and payable), levies, assessments, charges, liens,
claims or encumbrances upon or relating to (a) the Collateral, (b) the
Obligations, (c) the employees, payroll, income or gross receipts of any Credit
Party, (d) any Credit Party's ownership or use of any properties or other
assets, or (e) any other aspect of any Credit Party's business.
A-4
"CHATTEL PAPER" means any "chattel paper," as such term is defined in
the Code, including electronic chattel paper, now owned or hereafter acquired by
any Credit Party, wherever located.
"CLOSING DATE" means September 6, 2002.
"CLOSING CHECKLIST" means the schedule, including all appendices,
exhibits or schedules thereto, listing certain documents and information to be
delivered in connection with the Agreement, the other Loan Documents and the
transactions contemplated thereunder, substantially in the form attached hereto
as ANNEX D.
"CODE" means the Uniform Commercial Code as the same may, from time to
time, be enacted and in effect in the State of New York; PROVIDED, that to the
extent that the Code is used to define any term herein or in any Loan Document
and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall
govern; PROVIDED FURTHER, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or priority of, or
remedies with respect to, Agent's or any Lender's Lien on any Collateral is
governed by the Uniform Commercial Code as enacted and in effect in a
jurisdiction other than the State of New York, the term "CODE" shall mean the
Uniform Commercial Code as enacted and in effect in such other jurisdiction
solely for purposes of the provisions thereof relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such
provisions.
"COLLATERAL" means the property covered by the Security Agreement, the
Mortgages and the other Collateral Documents and any other property, real or
personal, tangible or intangible, now existing or hereafter acquired, that may
at any time be or become subject to a security interest or Lien in favor of
Agent, on behalf of itself and Lenders, to secure the Obligations.
"COLLATERAL DOCUMENTS" means the Security Agreement, the Pledge
Agreements, the Mortgages, the Intellectual Property Security Agreement, and all
similar agreements entered into guaranteeing payment of, or granting a Lien upon
property as security for payment of, the Obligations.
"COLLATERAL REPORTS" means the reports with respect to the Collateral
referred to in ANNEX F.
"COLLECTION ACCOUNT" means that certain account of Agent, account
number 000-000-00 in the name of Agent at Bankers Trust Company in New York, New
York ABA No. 021 001 033, or such other account as may be specified in writing
by Agent as the "Collection Account."
"COMMITMENT TERMINATION DATE" means the earliest of (a) September 6,
2007, (b) the date of termination of Lenders' obligations to make Advances and
to incur
A-5
Letter of Credit Obligations or permit existing Loans to remain outstanding
pursuant to SECTION 8.2(B), and (c) the date of indefeasible prepayment in full
by Borrower of the Loans and the cancellation and return (or stand-by guarantee)
of all Letters of Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B, and the permanent reduction of the Commitments
to zero dollars ($0).
"COMMITMENTS" means (a) as to any Lender, the aggregate of such
Lender's Revolving Loan Commitment and Term Loan Commitment as set forth on
ANNEX J to the Agreement or in the most recent Assignment Agreement executed by
such Lender and (b) as to all Lenders, the aggregate of all Lenders' Revolving
Loan Commitments and Term Loan Commitments, which aggregate commitment shall be
Eighteen Million Dollars ($18,000,000) on the Closing Date, as to each of
CLAUSES (A) AND (B), as such Commitments may be reduced, amortized or adjusted
from time to time in accordance with the Agreement.
"COMPLIANCE CERTIFICATE" has the meaning ascribed to it in ANNEX E.
"CONCENTRATION ACCOUNT" has the meaning ascribed to it in ANNEX C.
"CONTRACTS" means all "contracts," as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, in any event, including all
contracts, undertakings, or agreements (other than rights evidenced by Chattel
Paper, Documents or Instruments) in or under which any Credit Party may now or
hereafter have any right, title or interest, including any agreement relating to
the terms of payment or the terms of performance of any Account.
"CONTRIBUTED BUSINESS" means the assets and liabilities being
contributed to Borrower by Waldensian pursuant to, and in accordance with, the
Contribution Agreement.
"CONTRIBUTION" means the contribution of cash and/or other assets by
Waldensian, Encompass and GE Capital to the Borrower and the assumption of
certain liabilities by the Borrower pursuant to and in accordance with the
Contribution Agreement.
"CONTRIBUTION AGREEMENT" means that certain Contribution Agreement,
dated as of September 6, 2002 by and among the Borrower, Waldensian, Encompass
and GE Capital.
"CONTRIBUTION DOCUMENTS" means, collectively the Contribution
Agreement, each of the agreements listed as an exhibit thereto and all other
documents executed or delivered in connection therewith.
"CONTROL LETTER" means a letter agreement between Agent and (i) the
issuer of uncertificated securities with respect to uncertificated securities in
the name of
A-6
any Credit Party, (ii) a securities intermediary with respect to securities,
whether certificated or uncertificated, securities entitlements and other
financial assets held in a securities account in the name of any Credit Party,
(iii) a futures commission merchant or clearing house, as applicable, with
respect to commodity accounts and commodity contracts held by any Credit Party,
whereby, among other things, the issuer, securities intermediary or futures
commission merchant disclaims any security interest in the applicable financial
assets, acknowledges the Lien of Agent, on behalf of itself and Lenders, on such
financial assets, and agrees to follow the instructions or entitlement orders of
Agent without further consent by the affected Credit Party.
"COPYRIGHT LICENSE" means any and all rights now owned or hereafter
acquired by any Credit Party under any written agreement granting any right to
use any Copyright or Copyright registration.
"COPYRIGHT SECURITY AGREEMENTS" means the Copyright Security Agreements
made in favor of Agent, on behalf of itself and Lenders, by each applicable
Credit Party.
"COPYRIGHTS" means all of the following now owned or hereafter adopted
or acquired by any Credit Party: (a) all copyrights and General Intangibles of
like nature (whether registered or unregistered), all registrations and
recordings thereof, and all applications in connection therewith, including all
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any state or territory
thereof, or any other country or any political subdivision thereof, and (b) all
reissues, extensions or renewals thereof.
"CREDIT PARTIES" means Borrower, and each of its Subsidiaries.
"CURRENT ASSETS" means, with respect to any Person, all current assets
of such Person as of any date of determination calculated in accordance with
GAAP, but excluding cash, cash equivalents and debts due from Affiliates.
"CURRENT LIABILITIES" means, with respect to any Person, all
liabilities that should, in accordance with GAAP, be classified as current
liabilities, and in any event shall include all Indebtedness payable on demand
or within one year from any date of determination without any option on the part
of the obligor to extend or renew beyond such year, all accruals for federal or
other taxes based on or measured by income and payable within such year, but
excluding the current portion of long-term debt required to be paid within one
year and the aggregate outstanding principal balances of the Revolving Loan.
"CURRENT RATIO" means, with respect to any Person as of any date of
determination, the ratio of (a) Current Assets, to (b) Current Liabilities.
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"DEFAULT" means any event that, with the passage of time or notice or
both, would, unless cured or waived, become an Event of Default.
"DEFAULT RATE" has the meaning ascribed to it in SECTION 1.5(D).
"DEPOSIT ACCOUNTS" means all "deposit accounts" as such term in defined
in the Code, now or hereafter held in the name of any Credit Party.
"DISBURSEMENT ACCOUNTS" has the meaning ascribed to it in ANNEX C.
"DISCLOSURE SCHEDULES" means the Schedules prepared by Borrower and
denominated as DISCLOSURE SCHEDULES (1.4) THROUGH (6.7) in the Index to the
Agreement.
"DOCUMENTS" means any "documents," as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, wherever located.
"DOLLARS" or "$" means lawful currency of the United States of America.
"EBITDA" means, with respect to any Person for any fiscal period,
without duplication, an amount equal to (a) consolidated net income of such
Person for such period, determined in accordance with GAAP, MINUS (b) the sum of
(i) income tax credits, (ii) interest income, (iii) gain from extraordinary
items for such period, (iv) any aggregate net gain (but not any aggregate net
loss) during such period arising from the sale, exchange or other disposition of
capital assets by such Person (including any fixed assets, whether tangible or
intangible, all inventory sold in conjunction with the disposition of fixed
assets and all securities), and (v) any other non-cash gains that have been
added in determining consolidated net income, in each case to the extent
included in the calculation of consolidated net income of such Person for such
period in accordance with GAAP, but without duplication, PLUS (c) the sum of (i)
any provision for income taxes, (ii) Interest Expense, (iii) loss from
extraordinary items for such period, (iv) the amount of non-cash charges
(including depreciation and amortization) for such period, (v) amortized debt
discount for such period, and (vi) the amount of any deduction to consolidated
net income as the result of any grant to any members of the management of such
Person of any Stock, in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with GAAP,
but without duplication. For purposes of this definition, the following items
shall be excluded in determining consolidated net income of a Person: (1) the
income (or deficit) of any other Person accrued prior to the date it became a
Subsidiary of, or was merged or consolidated into, such Person or any of such
Person's Subsidiaries; (2) the income (or deficit) of any other Person (other
than a Subsidiary) in which such Person has an ownership interest, except to the
extent any such income has actually been received by such Person in the form of
cash dividends or distributions; (3) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or payment of
dividends or similar distributions by such Subsidiary is not at the time
permitted by the terms of any contractual obligation or requirement of law
applicable to such Subsidiary;
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(4) any restoration to income of any contingency reserve, except to the extent
that provision for such reserve was made out of income accrued during such
period; (5) any write-up of any asset; (6) any net gain from the collection of
the proceeds of life insurance policies; (7) any net gain arising from the
acquisition of any securities, or the extinguishment, under GAAP, of any
Indebtedness, of such Person, (8) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such
successor prior to such consolidation, merger or transfer of assets, and (9) any
deferred credit representing the excess of equity in any Subsidiary of such
Person at the date of acquisition of such Subsidiary over the cost to such
Person of the investment in such Subsidiary.
"ELIGIBLE ACCOUNTS" has the meaning ascribed to it in SECTION 1.6 of
the Agreement.
"ELIGIBLE INVENTORY" has the meaning ascribed to it in SECTION 1.7 of
the Agreement.
"EMPLOYMENT AGREEMENTS" means, collectively, those certain Employment
Agreements by and between the Borrower and (i) Xxxx Xxxx and (ii) Xxxxx Xxx,
each in effect on the date hereof and as may be amended with the consent of the
Agent.
"ENCOMPASS" has the meaning ascribed to it in the recitals to the
Agreement.
"ENVIRONMENTAL LAWS" means all applicable federal, state, local and
foreign laws, statutes, ordinances, codes, rules, standards and regulations, now
or hereafter in effect, and any applicable judicial or administrative
interpretation thereof, including any applicable judicial or administrative
order, consent decree, order or judgment, imposing liability or standards of
conduct for or relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation). Environmental Laws include the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42
U.S.C.ss.ss.9601 ET SEQ.) ("CERCLA"); the Hazardous Materials Transportation
Authorization Act of 1994 (49 X.X.X.xx.xx. 5101 ET SEQ.); the Federal
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.ss.ss.136 ET SEQ.); the
Solid Waste Disposal Act (42 X.X.X.xx.xx. 6901 ET SEQ.); the Toxic Substance
Control Act (15 U.S.C. ss.ss.2601 ET SEQ.); the Clean Air Act (42
U.S.C.ss.ss.7401 ET SEQ.); the Federal Water Pollution ConTrol Act (33
U.S.C.ss.ss.1251 ET SEQ.); the Occupational Safety and Health Act (29
U.S.C.ss.ss.651 ET SEQ.); and the Safe Drinking Water Act (42 X.X.X.xx.xx.
300(f) ET SEQ.), and any and all regulations promulgated thereunder, and all
analogous state, local and foreign counterparts or equivalents and any transfer
of ownership notification or approval statutes.
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"ENVIRONMENTAL LIABILITIES" means, with respect to any Person, all
liabilities, obligations, responsibilities, response, remedial and removal
costs, investigation and feasibility study costs, capital costs, operation and
maintenance costs, losses, damages, punitive damages, property damages, natural
resource damages, consequential damages, treble damages, costs and expenses
(including all reasonable fees, disbursements and expenses of counsel, experts
and consultants), fines, penalties, sanctions and interest incurred as a result
of or related to any claim, suit, action, investigation, proceeding or demand by
any Person, whether based in contract, tort, implied or express warranty, strict
liability, criminal or civil statute or common law, including any arising under
or related to any Environmental Laws, Environmental Permits, or in connection
with any Release or threatened Release or presence of a Hazardous Material
whether on, at, in, under, from or about or in the vicinity of any real or
personal property.
"ENVIRONMENTAL PERMITS" means all permits, licenses, authorizations,
certificates, approvals or registrations required by any Governmental Authority
under any Environmental Laws.
"EQUIPMENT" means all "equipment," as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, wherever located and, in
any event, including all such Credit Party's machinery and equipment, including
processing equipment, conveyors, machine tools, data processing and computer
equipment, including embedded software and peripheral equipment and all
engineering, processing and manufacturing equipment, office machinery,
furniture, materials handling equipment, tools, attachments, accessories,
automotive equipment, trailers, trucks, forklifts, molds, dies, stamps, motor
vehicles, rolling stock and other equipment of every kind and nature, trade
fixtures and fixtures not forming a part of real property, together with all
additions and accessions thereto, replacements therefor, all parts therefor, all
substitutes for any of the foregoing, fuel therefor, and all manuals, drawings,
instructions, warranties and rights with respect thereto, and all products and
proceeds thereof and condemnation awards and insurance proceeds with respect
thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulations promulgated thereunder.
"ERISA AFFILIATE" means, with respect to any Credit Party, any trade or
business (whether or not incorporated) that, together with such Credit Party,
are treated as a single employer within the meaning of Sections 414(b), (c), (m)
or (o) of the IRC.
"ERISA EVENT" means, with respect to any Credit Party or any ERISA
Affiliate, (a) any event described in Section 4043(c) of ERISA with respect to a
Title IV Plan; (b) the withdrawal of any Credit Party or ERISA Affiliate from a
Title IV Plan subject to Section 4063 of ERISA during a plan year in which it
was a substantial employer, as defined in Section 4001(a)(2) of ERISA; (c) the
complete or partial withdrawal of any Credit Party or any ERISA Affiliate from
any Multiemployer Plan; (d)
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the filing of a notice of intent to terminate a Title IV Plan or the treatment
of a plan amendment as a termination under Section 4041 of ERISA; (e) the
institution of proceedings to terminate a Title IV Plan or Multiemployer Plan by
the PBGC; (f) the failure by any Credit Party or ERISA Affiliate to make when
due required contributions to a Multiemployer Plan or Title IV Plan unless such
failure is cured within 30 days; (g) any other event or condition that might
reasonably be expected to constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Title IV Plan
or Multiemployer Plan or for the imposition of liability under Section 4069 or
4212(c) of ERISA; (h) the termination of a Multiemployer Plan under Section
4041A of ERISA or the reorganization or insolvency of a Multiemployer Plan under
Section 4241 or 4245 of ERISA; (i) the revocation or threatened revocation of a
Qualified Plan's qualification or tax exempt status; or (j) the termination of a
Plan described in Section 4064 of ERISA.
"ESOP" means a Plan that is intended to satisfy the requirements of
Section 4975(e)(7) of the IRC.
"EVENT OF DEFAULT" has the meaning ascribed to it in SECTION 8.1.
"EXCESS CASH FLOW" means, without duplication, with respect to any
Fiscal Year of Borrower and its Subsidiaries, consolidated net income prior to
distribution for taxes PLUS (a) depreciation, amortization and Interest Expense
to the extent deducted in determining consolidated net income, PLUS decreases or
MINUS increases (as the case may be) (b) in Working Capital, MINUS (c) Capital
Expenditures during such Fiscal Year (excluding the financed portion thereof and
excluding any Capital Expenditures in such Fiscal Year to the extent in excess
of the amount permitted to be made in such Fiscal Year pursuant to CLAUSE (A) of
ANNEX G), MINUS (d) Interest Expense paid or accrued (excluding any original
issue discount, interest paid in kind or amortized debt discount, to the extent
included in determining Interest Expense) and scheduled principal payments paid
or payable in respect of Indebtedness, PLUS or MINUS (as the case may be), (e)
extraordinary gains or losses which are cash items not included in the
calculation of net income, MINUS (f) prepayments paid in cash pursuant to
SECTION 1.3 other than mandatory prepayments made pursuant to SECTIONS
1.3(B)(I), 1.3(B)(II), 1.3(B)(IV) OR 1.3(D), MINUS (g) tax distributions made in
cash with respect to such Fiscal Year MINUS (h) to the extent such proceeds
would otherwise have been included in the calculation of Excess Cash, proceeds
of any asset disposition of the type referred to in Section 1.3(b)(ii) and any
insurance or condemnation proceeds of the type referred to in Section 1.3(d), in
each case whether or not a mandatory prepayment with respect thereto has been
made. For purposes of this definition, "WORKING CAPITAL" means Current Assets
MINUS Current Liabilities.
"FAIR LABOR STANDARDS ACT" means the Fair Labor Standards Act, 29
U.S.C.ss.201 et seq.
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"FEDERAL FUNDS RATE" means, for any day, a floating rate equal to the
weighted average of the rates on overnight federal funds transactions among
members of the Federal Reserve System, as determined by Agent in its sole
discretion, which determination shall be final, binding and conclusive (absent
manifest error).
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.
"FEES" means any and all fees payable to Agent or any Lender pursuant
to the Agreement or any of the other Loan Documents.
"FINANCIAL COVENANTS" means the financial covenants set forth in ANNEX
G.
"FINANCIAL STATEMENTS" means the consolidated and consolidating income
statements, statements of cash flows and balance sheets of Waldensian and
Borrower delivered in accordance with SECTION 3.4 and ANNEX E.
"FISCAL MONTH" means any of the monthly accounting periods of Borrower.
"FISCAL QUARTER" means any of the quarterly accounting periods of
Borrower, ending on March 31, June 30, September 30 and December 31 of each
year.
"FISCAL YEAR" means any of the annual accounting periods of Borrower
ending on December 31 of each year.
"FIXED CHARGES" means, with respect to any Person for any fiscal
period, (a) the aggregate of all Interest Expense paid or accrued during such
period, plus (b) scheduled payments of principal with respect to Indebtedness
during such period, plus (c) distributions payable pursuant to SECTION 6.14(F).
"FIXED CHARGE COVERAGE RATIO" means, with respect to any Person for any
fiscal period, the ratio of EBITDA less Capital Expenditures (which are not
capitalized for purposes of GAAP) to Fixed Charges. In computing Fixed Charges
for any fiscal period, interest and principal payments that are due within one
week after the end of that fiscal period, without duplication, shall be deemed
to have been paid on the last day of that fiscal period.
"FIXTURES" means all "fixtures" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party.
"FUNDED DEBT" means, with respect to any Person, without duplication,
all Indebtedness for borrowed money evidenced by notes, bonds, debentures, or
similar evidences of Indebtedness and that by its terms matures more than one
year from, or is
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directly or indirectly renewable or extendible at such Person's option under a
revolving credit or similar agreement obligating the lender or lenders to extend
credit over a period of more than one year from the date of creation thereof,
and specifically including Capital Lease Obligations, current maturities of
long-term debt, revolving credit and short-term debt extendible beyond one year
at the option of the debtor, and also including, in the case of Borrower, the
Obligations and, without duplication, Guaranteed Indebtedness consisting of
guaranties of Funded Debt of other Persons.
"GAAP" means generally accepted accounting principles in the United
States of America, consistently applied, as such term is further defined in
Annex G to the Agreement.
"GE CAPITAL" means General Electric Capital Corporation, a Delaware
corporation.
"GE CAPITAL FEE LETTER" means that certain letter, dated as of even
date herewith, between GE Capital and Borrower with respect to certain Fees to
be paid from time to time by Borrower to GE Capital.
"GE STOCKHOLDER" has the meaning ascribed to it in the recitals to the
Agreement.
"GENERAL INTANGIBLES" means "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Credit Party,
including all right, title and interest that such Credit Party may now or
hereafter have in or under any Contract, all payment intangibles, customer
lists, Licenses, Copyrights, Trademarks, Patents, and all applications therefor
and reissues, extensions or renewals thereof, rights in Intellectual Property,
interests in partnerships, joint ventures and other business associations,
licenses, permits, copyrights, trade secrets, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials and
records, goodwill (including the goodwill associated with any Trademark or
Trademark License), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key man and business interruption insurance, and all unearned
premiums), uncertificated securities, chooses in action, deposit, checking and
other bank accounts, rights to receive tax refunds and other payments, rights to
receive dividends, distributions, cash, Instruments and other property in
respect of or in exchange for pledged Stock and Investment Property, rights of
indemnification, all books and records, correspondence, credit files, invoices
and other papers, including without limitation all tapes, cards, computer runs
and other papers and documents in the possession or under the control of such
Credit Party or any computer bureau or service company from time to time acting
for such Credit Party.
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"GOODS" means any "goods" as defined in the Code, now owned or
hereafter acquired by any Credit Party, wherever located, including embedded
software to the extent included in "goods" as defined in the Code, manufactured
homes, standing timber that is cut and removed for sale and unborn young of
animals.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or
other political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTEED INDEBTEDNESS" means, as to any Person, any obligation of
such Person guaranteeing, providing comfort or otherwise supporting any
Indebtedness, lease, dividend, or other obligation ("PRIMARY OBLIGATION") of any
other Person (the "PRIMARY OBLIGOR") in any manner, including any obligation or
arrangement of such Person to (a) purchase or repurchase any such primary
obligation, (b) advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (c) purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, (d) protect the beneficiary of such arrangement from
loss (other than product warranties given in the ordinary course of business) or
(e) indemnify the owner of such primary obligation against loss in respect
thereof. The amount of any Guaranteed Indebtedness at any time shall be deemed
to be an amount equal to the lesser at such time of (x) the stated or
determinable amount of the primary obligation in respect of which such
Guaranteed Indebtedness is incurred and (y) the maximum amount for which such
Person may be liable pursuant to the terms of the instrument embodying such
Guaranteed Indebtedness, or, if not stated or determinable, the maximum
reasonably anticipated liability (assuming full performance) in respect thereof.
"HAZARDOUS MATERIAL" means any substance, material or waste that is
regulated by, or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance that is (a) defined as a
"solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "pollutant,"
"contaminant," "hazardous constituent," "special waste," "toxic substance" or
other similar term or phrase under any Environmental Laws, or (b) petroleum or
any fraction or by-product thereof, asbestos, polychlorinated biphenyls (PCB's),
or any radioactive substance.
"INDEBTEDNESS" means , with respect to any Person, without duplication
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property payment for which is deferred 6 months or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are unsecured and not overdue by more than 6 months unless being
contested in good faith, (b) all
A-14
reimbursement and other obligations with respect to letters of credit, bankers'
acceptances and surety bonds, whether or not matured, (c) all obligations
evidenced by notes, bonds, debentures or similar instruments, (d) all
indebtedness created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations and the present value (discounted at the Index
Rate as in effect on the Closing Date) of future rental payments under all
synthetic leases, (f) all obligations of such Person under commodity purchase or
option agreements or other commodity price hedging arrangements, in each case
whether contingent or matured, (g) all obligations of such Person under any
foreign exchange contract, currency swap agreement, interest rate swap, cap or
collar agreement or other similar agreement or arrangement designed to alter the
risks of that Person arising from fluctuations in currency values or interest
rates, in each case whether contingent or matured, (h) all Indebtedness referred
to above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien upon or in
property or other assets (including accounts and contract rights) owned by such
Person, even though such Person has not assumed or become liable for the payment
of such Indebtedness, and (i) the Obligations.
"INDEMNIFIED LIABILITIES" has the meaning ascribed to it in SECTION
1.13.
"INDEMNIFIED PERSON" has the meaning ascribed to it in SECTION 1.13.
"INDEX RATE" means, for any day, a floating rate equal to the higher of
(i) the rate publicly quoted from time to time by THE WALL STREET JOURNAL as the
"base rate on corporate loans posted by at least 75% of the nation's 30 largest
banks" (or, if THE WALL STREET JOURNAL ceases quoting a base rate of the type
described, the highest per annum rate of interest published by the Federal
Reserve Board in Federal Reserve statistical release H.15 (519) entitled
"Selected Interest Rates" as the Bank prime loan rate or its equivalent), and
(ii) the Federal Funds Rate plus 50 basis points per annum. Each change in any
interest rate provided for in the Agreement based upon the Index Rate shall take
effect at the time of such change in the Index Rate.
"INDEX RATE LOAN" means a Loan or portion thereof bearing interest by
reference to the Index Rate.
"INSTRUMENTS" means all "instruments," as such term is defined in the
Code, now owned or hereafter acquired by any Credit Party, wherever located,
and, in any event, including all certificated securities, all certificates of
deposit, and all promissory notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"INTELLECTUAL PROPERTY" means any and all Licenses, Patents,
Copyrights, Trademarks, and the goodwill associated with such Trademarks.
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"INTELLECTUAL PROPERTY SECURITY AGREEMENTS" means the Intellectual
Property Security Agreements made in favor of Agent, on behalf of itself and
Lenders, by each applicable Credit Party.
"INTEREST COVERAGE RATIO" means, with respect to any Person for any
period, the ratio of EBITDA to Interest Expense.
"INTEREST EXPENSE" means, with respect to any Person for any fiscal
period, interest expense (whether cash or non-cash) of such Person determined in
accordance with GAAP for the relevant period ended on such date, including
interest expense with respect to any Funded Debt of such Person and interest
expense for the relevant period that has been capitalized on the balance sheet
of such Person.
"INTEREST PAYMENT DATE" means (a) as to any Index Rate Loan, the first
Business Day of each month to occur while such Loan is outstanding, and (b) as
to any LIBOR Loan, the last day of the applicable LIBOR Period; PROVIDED that,
in addition to the foregoing, each of (x) the date upon which all of the
Commitments have been terminated and the Loans have been paid in full and (y)
the Commitment Termination Date shall be deemed to be an "INTEREST PAYMENT DATE"
with respect to any interest that has then accrued under the Agreement.
"INVENTORY" means any "inventory," as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, wherever located, and in
any event including inventory, merchandise, goods and other personal property
that are held by or on behalf of any Credit Party for sale or lease or are
furnished or are to be furnished under a contract of service, or that constitute
raw materials, work in process, finished goods, returned goods, supplies or
materials of any kind, nature or description used or consumed or to be used or
consumed in such Credit Party's business or in the processing, production,
packaging, promotion, delivery or shipping of the same, including all supplies
and embedded software.
"INVESTMENT PROPERTY" means all "investment property" as such term is
defined in the Code now owned or hereafter acquired by any Credit Party,
wherever located, including (i) all securities, whether certificated or
uncertificated, including stocks, bonds, interests in limited liability
companies, partnership interests, treasuries, certificates of deposit, and
mutual fund shares; (ii) all securities entitlements of any Credit Party,
including the rights of such Credit Party to any securities account and the
financial assets held by a securities intermediary in such securities account
and any free credit balance or other money owing by any securities intermediary
with respect to that account; (iii) all securities accounts of any Credit Party;
(iv) all commodity contracts of any Credit Party; and (v) all commodity accounts
held by any Credit Party.
"IRC" means the Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder.
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"IRS" means the Internal Revenue Service.
"L/C ISSUER" has the meaning ascribed to it in ANNEX B.
"L/C SUBLIMIT" has the meaning ascribed to in it ANNEX B.
"LENDERS" means GE Capital, the other Lenders named on the signature
pages of the Agreement, and, if any such Lender assigns all or any portion of
the Obligations in accordance with SECTION 9.1 of the Agreement, such term shall
include such assignee of such Lender.
"LETTER OF CREDIT FEE" has the meaning ascribed to it in ANNEX B.
"LETTER OF CREDIT OBLIGATIONS" means all outstanding obligations
incurred by Agent and Lenders at the request of Borrower, whether direct or
indirect, contingent or otherwise, due or not due, in connection with the
issuance of Letters of Credit by Agent or another L/C Issuer or the purchase of
a participation as set forth in ANNEX B with respect to any Letter of Credit.
The amount of such Letter of Credit Obligations shall equal the maximum amount
that may be payable by Agent or Lenders thereupon or pursuant thereto.
"LETTERS OF CREDIT" means standby letters of credit issued for the
account of Borrower by any L/C Issuer, and bankers' acceptances issued by
Borrower, for which Agent and Lenders have incurred Letter of Credit
Obligations.
"LETTER-OF CREDIT RIGHTS" means "letter-of-credit rights" as such term
is defined in the Code, now owned or hereafter acquired by any Credit Party,
including rights to payment or performance under a letter of credit, whether or
not such Credit Party, as beneficiary, has demanded or is entitled to demand
payment or performance.
"LEVERAGE RATIO" means, with respect to Borrower, on a consolidated
basis, the ratio of (a) Funded Debt as of any date of determination, to (b) the
sum of EBITDA for the twelve months ending on that date of determination.
"LIBOR BUSINESS DAY" means a Business Day on which banks in the City of
London are generally open for interbank or foreign exchange transactions.
"LIBOR LOAN" means a Loan or any portion thereof bearing interest by
reference to the LIBOR Rate.
"LIBOR PERIOD" means, with respect to any LIBOR Loan, each period
commencing on a LIBOR Business Day selected by Borrower pursuant to the
Agreement and ending one, two or three months thereafter, as selected by
Borrower's irrevocable notice to Agent as set forth in SECTION 1.5(E); PROVIDED,
that the foregoing provision relating to LIBOR Periods is subject to the
following:
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(a) if any LIBOR Period would otherwise end on a day that is not a LIBOR
Business Day, such LIBOR Period shall be extended to the next succeeding LIBOR
Business Day unless the result of such extension would be to carry such LIBOR
Period into another calendar month in which event such LIBOR Period shall end on
the immediately preceding LIBOR Business Day;
(b) any LIBOR Period that would otherwise extend beyond the Commitment
Termination Date shall end 2 LIBOR Business Days prior to such date;
(c) any LIBOR Period that begins on the last LIBOR Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such LIBOR Period) shall end on the last
LIBOR Business Day of a calendar month;
(d) Borrower shall select LIBOR Periods so as not to require a payment or
prepayment of any LIBOR Loan during a LIBOR Period for such Loan; and
(e) Borrower shall select LIBOR Periods so that there shall be no more than
5 separate LIBOR Loans in existence at any one time.
"LIBOR RATE" means for each LIBOR Period, a rate of interest determined
by Agent equal to:
(a) the offered rate for deposits in United States Dollars for the
applicable LIBOR Period that appears on Telerate Page 3750 as of 11:00 a.m.
(London time), on the second full LIBOR Business Day next preceding the first
day of such LIBOR Period (unless such date is not a Business Day, in which event
the next succeeding Business Day will be used); divided by
(b) a number equal to 1.0 minus the aggregate (but without duplication) of
the rates (expressed as a decimal fraction) of reserve requirements in effect on
the day that is 2 LIBOR Business Days prior to the beginning of such LIBOR
Period (including basic, supplemental, marginal and emergency reserves under any
regulations of the Federal Reserve Board or other Governmental Authority having
jurisdiction with respect thereto, as now and from time to time in effect) for
Eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Federal Reserve Board that are required to be maintained by
a member bank of the Federal Reserve System.
If such interest rates shall cease to be available from Telerate News
Service, the LIBOR Rate shall be determined from such financial reporting
service or other information as shall be mutually acceptable to Agent and
Borrower. To the extent any reserve requirements which are taken into account in
determining the LIBOR Rate is subsequently adjusted during such LIBOR Period,
Agent and Lenders shall, at the request of Borrower, refund any amounts it has
received in excess of the amounts it would have received if the LIBOR Rate gave
effect to all such adjustments during such LIBOR
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Period, PROVIDED, that Agent and Lenders shall only be required to make such
payments if Borrower pays for all expenses relating to the determination of any
such calculations.
"LICENSE" means any Copyright License, Patent License, Trademark
License or other license of rights or interests now held or hereafter acquired
by any Credit Party.
"LIEN" means any mortgage or deed of trust, pledge, hypothecation,
assignment, deposit arrangement, lien, charge, claim, security interest,
easement or encumbrance, or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever (including any lease
or title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of, or agreement to
give, any financing statement perfecting a security interest under the Code or
comparable law of any jurisdiction).
"LITIGATION" has the meaning ascribed to it in SECTION 3.13.
"LOAN ACCOUNT" has the meaning ascribed to it in SECTION 1.12.
"LOAN DOCUMENTS" means the Agreement, the Notes, the Collateral
Documents, the Master Standby Agreement, and all other agreements, instruments,
documents and certificates identified in the Closing Checklist executed and
delivered to, or in favor of, Agent or any Lenders and including all other
pledges, powers of attorney, consents, assignments, contracts, notices, and all
other written matter whether heretofore, now or hereafter executed by or on
behalf of any Credit Party, or any employee of any Credit Party, and delivered
to Agent or any Lender in connection with the Agreement or the transactions
contemplated thereby. Any reference in the Agreement or any other Loan Document
to a Loan Document shall include all appendices, exhibits or schedules thereto,
and all amendments, restatements, supplements or other modifications thereto,
and shall refer to the Agreement or such Loan Document as the same may be in
effect at any and all times such reference becomes operative.
"LOANS" means the Revolving Loan and the Term Loan.
"MARGIN STOCK" has the meaning ascribed to it in SECTION 3.10.
"MASTER STANDBY AGREEMENT" means the Master Agreement for Standby
Letters of Credit dated as of the Closing Date between Borrower, as Applicant,
and GE Capital, as Issuer.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of the
Credit Parties considered as a whole, (b) Borrower's ability to pay any of the
Loans or any of the other Obligations in accordance with the terms of the
Agreement, (c) the Collateral or Agent's Liens, on behalf of itself and Lenders,
on the Collateral or the priority of such Liens, or
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(d) Agent's or any Lender's rights and remedies under the Agreement and the
other Loan Documents.
"MAXIMUM AMOUNT" means, as of any date of determination, an amount
equal to the Revolving Loan Commitment of all Lenders as of that date.
"MORTGAGED PROPERTIES" has the meaning assigned to it in ANNEX D.
"MORTGAGES" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by any Credit Party to Agent on behalf
of itself and Lenders with respect to the Mortgaged Properties, all in form and
substance reasonably satisfactory to Agent.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, and to which any Credit Party or ERISA Affiliate is making,
is obligated to make or has made or been obligated to make, contributions on
behalf of participants who are or were employed by any of them.
"NET WORTH" means, with respect to any Person as of any date of
determination, the book value of the assets of such Person, minus the sum of (a)
reserves applicable thereto, and (b) all of such Person's liabilities on a
consolidated basis (including accrued and deferred income taxes), all as
determined in accordance with GAAP.
"NON-CONSENTING LENDER" has the meaning ascribed to it in SECTION
11.12(D).
"NON-FUNDING LENDER" has the meaning ascribed to it in SECTION
9.9(A)(II).
"NOTES" means, collectively, the Revolving Notes and the Term Notes.
"NOTICE OF CONVERSION/CONTINUATION" has the meaning ascribed to it in
SECTION 1.5(E).
"NOTICE OF REVOLVING CREDIT ADVANCE" has the meaning ascribed to it in
SECTION 1.1(A).
"OBLIGATIONS" means all loans, advances, debts, liabilities and
obligations, for the performance of covenants, tasks or duties or for payment of
monetary amounts (whether or not such performance is then required or
contingent, or such amounts are liquidated or determinable) owing by any Credit
Party to Agent or any Lender, and all covenants and duties regarding such
amounts, of any kind or nature, present or future, whether or not evidenced by
any note, agreement or other instrument, arising under the Agreement or any of
the other Loan Documents. This term includes all principal, interest
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(including all interest that accrues after the commencement of any case or
proceeding by or against any Credit Party in bankruptcy, whether or not allowed
in such case or proceeding), Fees, Charges, expenses, attorneys' fees and any
other sum chargeable to any Credit Party under the Agreement or any of the other
Loan Documents.
"OVERADVANCE" has the meaning ascribed to it in SECTION 1.1(A)(III).
"PATENT LICENSE" means rights under any written agreement now owned or
hereafter acquired by any Credit Party granting any right with respect to any
invention on which a Patent is in existence.
"PATENTS" means all of the following in which any Credit Party now
holds or hereafter acquires any interest: (a) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or of any other country,
including registrations, recordings and applications in the United States Patent
and Trademark Office or in any similar office or agency of the United States,
any State or any other country, and (b) all reissues, continuations,
continuations-in-part or extensions thereof.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means a Plan described in Section 3(2) of ERISA.
"PERMITTED ENCUMBRANCES" means the following encumbrances: (a) Liens
for taxes or assessments or other governmental Charges not yet due and payable
or which are being contested in accordance with SECTION 5.2(B); (b) pledges or
deposits of money securing statutory obligations under workmen's compensation,
unemployment insurance, social security or public liability laws or similar
legislation (excluding Liens under ERISA); (c) pledges or deposits of money
securing bids, tenders, contracts (other than contracts for the payment of
money) or leases to which any Credit Party is a party as lessee made in the
ordinary course of business; (d) inchoate and unperfected (provided that
inchoate liens which are perfected only by operation of law shall be considered
unperfected) workers', carriers', mechanics' or similar liens arising in the
ordinary course of business, so long as such Liens attach only to Equipment,
Fixtures and/or Real Estate (and proceeds thereof); (e) deposits securing, or in
lieu of, surety, appeal or customs bonds in proceedings to which any Credit
Party is a party; (f) any attachment or judgment lien not constituting an Event
of Default under SECTION 8.1(J); (g) zoning restrictions, easements, licenses,
or other restrictions on the use of any Real Estate or other minor
irregularities in title (including leasehold title) thereto, so long as the same
do not materially impair the use, in each case as currently used by any Credit
Party, value, or marketability of such Real Estate; (h) any grants or
reservation of surface or subsurface rights of others in and to the removal and
mining of oil, gas or minerals from such Real Estate, including rights of
ingress and egress with respect thereto, so long as the same do not materially
impair the use (as currently used by any Credit Party), value or marketability
of such Real Estate; (i) presently existing or hereafter created Liens in favor
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of Agent, on behalf of Lenders; and (j) Liens expressly permitted under clauses
(b) and (c) of SECTION 6.7 of the Agreement.
"PERSON" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation, limited
liability company, institution, public benefit corporation, other entity or
government (whether federal, state, county, city, municipal, local, foreign, or
otherwise, including any instrumentality, division, agency, body or department
thereof).
"PLAN" means, at any time, an "employee benefit plan," as defined in
Section 3(3) of ERISA, that any Credit Party or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by any Credit Party.
"PLEDGE AGREEMENTS" means the Borrower Pledge Agreement, the Borrower
Stockholders Pledge Agreement, and any other pledge agreement entered into after
the Closing Date by any Credit Party (as required by the Agreement or any other
Loan Document).
"PRIOR LENDER" means collectively, Bank Hapoalim B.M., New York Branch,
and Israeli Discount Bank of New York, together with their successors and
assigns.
"PRIOR LENDER OBLIGATIONS" means all liabilities and obligations owing
by the Borrower to the Prior Lender.
"PROCEEDS" means "proceeds," as such term is defined in the Code,
including (a) any and all proceeds of any insurance, indemnity, warranty or
guaranty payable to any Credit Party from time to time with respect to any of
the Collateral, (b) any and all payments (in any form whatsoever) made or due
and payable to any Credit Party from time to time in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral by any Governmental Authority (or any Person acting under
color of governmental authority), (c) any claim of any Credit Party against
third parties (i) for past, present or future infringement of any Patent or
Patent License, or (ii) for past, present or future infringement or dilution of
any Copyright, Copyright License, Trademark or Trademark License, or for injury
to the goodwill associated with any Trademark or Trademark License, (d) any
recoveries by any Credit Party against third parties with respect to any
litigation or dispute concerning any of the Collateral including claims arising
out of the loss or nonconformity of, interference with the use of, defects in,
or infringement of rights in, or damage to, Collateral, (e) all amounts
collected on, or distributed on account of, other Collateral, including
dividends, interest, distributions and Instruments with respect to Investment
Property and pledged Stock, and (f) any and all other amounts, rights to payment
or other property acquired upon the sale, lease, license, exchange or other
disposition of Collateral and all rights arising out of Collateral.
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"PRO FORMA" means the unaudited consolidated and consolidating balance
sheet of Borrower and its Subsidiaries as of June 30, 2002 after giving pro
forma effect to the Related Transactions.
"PROPOSED CHANGE" has the meaning ascribed to it in SECTION 11.2(D).
"PROJECTIONS" means Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash flow
statements; and (d) capitalization statements, all prepared on a Subsidiary by
Subsidiary or division-by-division basis, if applicable, and otherwise
consistent with the historical Financial Statements of Borrower, together with
appropriate supporting details and a statement of underlying assumptions.
"PRO RATA SHARE" means with respect to all matters relating to any
Lender (a) with respect to the Revolving Loan, the percentage obtained by
dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate
Revolving Loan Commitments of all Lenders, (b) with respect to the Term Loan,
the percentage obtained by dividing (i) the Term Loan Commitment of that Lender
by (ii) the aggregate Term Loan Commitments of all Lenders, as any such
percentages may be adjusted by assignments permitted pursuant to SECTION 9.1,
(c) with respect to all Loans, the percentage obtained by dividing (i) the
aggregate Commitments of that Lender by (ii) the aggregate Commitments of all
Lenders, and (d) with respect to all Loans on and after the Commitment
Termination Date, the percentage obtained by dividing (i) the aggregate
outstanding principal balance of the Loans held by that Lender, by (ii) the
outstanding principal balance of the Loans held by all Lenders.
"PUT OPTION AGREEMENT" means that certain Put Option Agreement, dated
as of September 6, 2002 by and among Waldensian, Encompass and the Borrower, as
in effect on the date hereof and as may be amended with the consent of the
Agent.
"PUT OPTION DEBT" means Indebtedness, the terms of which are acceptable
to Agent in its sole and absolute discretion incurred in accordance with SECTION
6.3, the proceeds of which shall be used solely to purchase the Stock of the
Borrower held by Waldensian in accordance with the terms of the Put Option
Agreement.
"QUALIFIED PLAN" means a Pension Plan that is intended to be
tax-qualified under Section 401(a) of the IRC.
"QUALIFIED ASSIGNEE" means (a) any Lender, any Affiliate of any Lender
and, with respect to any Lender that is an investment fund that invests in
commercial loans, any other investment fund that invests in commercial loans and
that is managed or advised by the same investment advisor as such Lender or by
an Affiliate of such investment advisor, and (b) any commercial bank, savings
and loan association or savings bank or any other entity which is an "accredited
investor" (as defined in Regulation D under the Securities Act) which extends
credit or buys loans as one of its businesses,
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including insurance companies, mutual funds, lease financing companies and
commercial finance companies, in each case, which has a rating of BBB or higher
from S&P and a rating of Baa2 or higher from Xxxxx'x at the date that it becomes
a Lender and which, through its applicable lending office, is capable of lending
to Borrower without the imposition of any withholding or similar taxes; provided
that no Person determined by Agent to be acting in the capacity of a vulture
fund or distressed debt purchaser shall be a Qualified Assignee and no Person or
Affiliate of such Person (other than a Person that is already a Lender) holding
Indebtedness which is subordinated to the Obligations or Stock issued by any
Credit Party shall be a Qualified Assignee.
"REAL ESTATE" has the meaning ascribed to it in SECTION 3.6.
"REFINANCING" means the repayment in full by Borrower of the Prior
Lender Obligations on the Closing Date.
"RELATED TRANSACTIONS" means the initial borrowing under the Revolving
Loan and the Term Loan on the Closing Date, the Contribution, the Refinancing,
the payment of all fees, costs and expenses associated with all of the foregoing
and the execution and delivery of all of the Related Transactions Documents.
"RELATED TRANSACTIONS DOCUMENTS" means the Loan Documents, the
Contribution Documents, and all other agreements or instruments executed in
connection with the Related Transactions.
"RELEASE" means any release, threatened release, spill, emission,
leaking, pumping, pouring, emitting, emptying, escape, injection, deposit,
disposal, discharge, dispersal, dumping, leaching or migration of Hazardous
Material in the indoor or outdoor environment, including the movement of
Hazardous Material through or in the air, soil, surface water, ground water or
property.
"REQUISITE LENDERS" means Lenders having (a) more than 66 2/3% of the
Commitments of all Lenders, or (b) if the Commitments have been terminated, more
than 66 2/3% of the aggregate outstanding amount of the Loans.
"REQUISITE REVOLVING LENDERS" means Lenders having (a) more than 66
2/3% of the Revolving Loan Commitments of all Lenders, or (b) if the Revolving
Loan Commitments have been terminated, more than 66 2/3% of the aggregate
outstanding amount of the Revolving Loan.
"RESERVES" means, with respect to the Borrowing Base of Borrower (a)
reserves established by Agent from time to time against Eligible Inventory
pursuant to SECTION 5.9, (b) reserves established pursuant to SECTION 5.4(C),
(c) such other reserves against Eligible Accounts, Eligible Inventory or
Borrowing Availability of Borrower that Agent may, in its reasonable credit
judgment, establish from time to time. Without limiting the generality of the
foregoing, Reserves established to ensure the payment of
A-24
accrued Interest Expenses or Indebtedness (other than the principal of Revolving
Credit Advances hereunder) shall be deemed to be a reasonable exercise of
Agent's credit judgment.
"RESTRICTED PAYMENT" means, with respect to any Credit Party (a) the
declaration or payment of any dividend or the incurrence of any liability to
make any other payment or distribution of cash or other property or assets in
respect of Stock; (b) any payment on account of the purchase, redemption,
defeasance, sinking fund or other retirement of such Credit Party's Stock or any
other payment or distribution made in respect thereof, either directly or
indirectly; (c) any payment or prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to, any Indebtedness which is subordinated to the
Obligations; (d) any payment made to redeem, purchase, repurchase or retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire Stock of such Credit Party now or hereafter outstanding; (e) any payment
of a claim for the rescission of the purchase or sale of, or for material
damages arising from the purchase or sale of, any shares of such Credit Party's
Stock or of a claim for reimbursement, indemnification or contribution arising
out of or related to any such claim for damages or rescission; (f) any payment,
loan, contribution, or other transfer of funds or other property to any
Stockholder of such Credit Party other than payment of compensation in the
ordinary course of business to Stockholders who are employees of such Credit
Party; and (g) any payment of management fees (or other fees of a similar
nature) by such Credit Party to any Stockholder of such Credit Party or its
Affiliates.
"RETIREE WELFARE PLAN" means, at any time, a Welfare Plan that provides
for continuing coverage or benefits for any participant or any beneficiary of a
participant after such participant's termination of employment, other than
continuation coverage provided pursuant to Section 4980B of the IRC and at the
sole expense of the participant or the beneficiary of the participant.
"REVOLVING CREDIT ADVANCE" has the meaning ascribed to it in SECTION
1.1(A)(i).
"REVOLVING LENDERS" means, as of any date of determination, Lenders
having a Revolving Loan Commitment.
"REVOLVING LOAN" means, at any time, the sum of (i) the aggregate
amount of Revolving Credit Advances outstanding to Borrower PLUS (ii) the
aggregate Letter of Credit Obligations incurred on behalf of Borrower. Unless
the context otherwise requires, references to the outstanding principal balance
of the Revolving Loan shall include the outstanding balance of Letter of Credit
Obligations.
"REVOLVING LOAN COMMITMENT" means (a) as to any Revolving Lender, the
aggregate commitment of such Revolving Lender to make Revolving Credit
A-25
Advances or incur Letter of Credit Obligations as set forth on ANNEX J to the
Agreement or in the most recent Assignment Agreement executed by such Revolving
Lender and (b) as to all Revolving Lenders, the aggregate commitment of all
Revolving Lenders to make Revolving Credit Advances or incur Letter of Credit
Obligations, which aggregate commitment shall be Three Million Dollars
($3,000,000) on the Closing Date, as such amount may be adjusted, if at all,
from time to time in accordance with the Agreement.
"REVOLVING NOTE" has the meaning ascribed to it in SECTION 1.1(A)(II).
"SALES AND MARKETING AGREEMENT" means that certain Sales and Marketing
Agreement, dated as of September 6, 2002 by and between Encompass and the
Borrower, as in effect on the date hereof and as may be amended with the consent
of the Agent and upon the termination of the agreement with Encompass, any
replacement agreement pursuant to which such services would be provided to
Borrower on substantially the same terms and conditions (including with respect
to the payment of fees, costs and expenses).
"SECURITY AGREEMENT" means the Security Agreement of even date herewith
entered into by and among Agent, on behalf of itself and Lenders, and each
Credit Party that is a signatory thereto.
"SETTLEMENT DATE" has the meaning ascribed to it in SECTION 9.9(A)(II).
"SOFTWARE" means all "software" as such term is defined in the Code,
now owned or hereafter acquired by any Credit Party, other than software
embedded in any category of Goods, including all computer programs and all
supporting information provided in connection with a transaction related to any
program.
"SOLVENT" means, with respect to any Person on a particular date, that
on such date (a) the fair value of the property of such Person is greater than
the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur debts or liabilities
beyond such Person's ability to pay as such debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can be reasonably be expected
to become an actual or matured liability.
"STOCK" means all shares, options, warrants, general or limited
partnership interests, membership interests or other equivalents (regardless of
how designated) of or in a corporation, partnership, limited liability company
or equivalent entity whether voting or nonvoting, including common stock,
preferred stock or any other "equity
A-26
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"STOCKHOLDER" means, with respect to any Person, each holder of Stock
of such Person.
"SUBSIDIARY" means, with respect to any Person, (a) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person or one or more Subsidiaries of such
Person, or with respect to which any such Person has the right to vote or
designate the vote of 50% or more of such Stock whether by proxy, agreement,
operation of law or otherwise, and (b) any partnership or limited liability
company in which such Person and/or one or more Subsidiaries of such Person
shall have an interest (whether in the form of voting or participation in
profits or capital contribution) of more than 50% or of which any such Person is
a general partner or may exercise the powers of a general partner. Unless the
context otherwise requires, each reference to a Subsidiary shall be a reference
to a Subsidiary of the Borrower.
"SUPPLY AGREEMENT" means that certain Purchase and Supply Agreement,
dated as of September 6, 2002 by and between Encompass and the Borrower, as in
effect on the date hereof and as may be amended with the consent of the Agent
and upon the termination of the agreement with Encompass, any replacement
agreement pursuant to which such services would be provided to Borrower on
substantially the same terms and conditions (including with respect to the
payment of fees, costs and expenses).
"SUPPORTING OBLIGATIONS" means all "supporting obligations" as such
term is defined in the Code, including letters of credit and guaranties issued
in support of Accounts, Chattel Paper, Documents, General Intangibles,
Instruments, or Investment Property.
"TANGIBLE NET WORTH" means, with respect to any Person at any date, the
Net Worth of such Person at such date, EXCLUDING, HOWEVER, from the
determination of the total assets at such date, (a) all goodwill, capitalized
organizational expenses, capitalized research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other intangible items, (b) all unamortized debt
discount and expense, (c) treasury Stock, and (d) any write-up in the book value
of any asset resulting from a revaluation thereof.
"TAXES" means taxes, levies, imposts, deductions, Charges or
withholdings, and all liabilities with respect thereto, excluding taxes imposed
on or measured by the net income of Agent or a Lender by the jurisdictions under
the laws of
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which Agent and Lenders are organized or conduct business or any political
subdivision thereof.
"TERMINATION DATE" means the date on which (a) the Loans have been
indefeasibly repaid in full, (b) all other Obligations under the Agreement and
the other Loan Documents have been completely discharged, (c) all Letter of
Credit Obligations have been cash collateralized, cancelled or backed by standby
letters of credit in accordance with ANNEX B, and (d) Borrower shall not have
any further right to borrow any monies under the Agreement.
"TERM LENDERS" means those Lenders having Term Loan Commitments.
"TERM LOAN" has the meaning assigned to it in SECTION 1.1(B)(I).
"TERM LOAN COMMITMENT" means (a) as to any Lender with a Term Loan
Commitment, the commitment of such Lender to make its Pro Rata Share of the Term
Loan as set forth on ANNEX J to the Agreement or in the most recent Assignment
Agreement executed by such Lender, and (b) as to all Lenders with a Term Loan
Commitment, the aggregate commitment of all Lenders to make the Term Loan, which
aggregate commitment shall be Fifteen Million Dollars ($15,000,000) on the
Closing Date. After advancing the Term Loan, each reference to a Lender's Term
Loan Commitment shall refer to that Lender's Pro Rata Share of the outstanding
Term Loan.
"TERM NOTE" has the meaning assigned to it in SECTION 1.1(B)(I).
"TITLE IV PLAN" means a Pension Plan (other than a Multiemployer Plan),
that is covered by Title IV of ERISA, and that any Credit Party or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"TRADEMARK LICENSE" means rights under any written agreement now owned
or hereafter acquired by any Credit Party granting any right to use any
Trademark.
"TRADEMARKS" means all of the following now owned or hereafter adopted
or acquired by any Credit Party: (a) all trademarks, trade names, corporate
names, business names, trade styles, service marks, logos, other source or
business identifiers, prints and labels on which any of the foregoing have
appeared or appear, designs and general intangibles of like nature (whether
registered or unregistered), all registrations and recordings thereof, and all
applications in connection therewith, including registrations, recordings and
applications in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any state or territory thereof, or any
other country or any political subdivision thereof; (b) all reissues, extensions
or renewals thereof; and (c) all goodwill associated with or symbolized by any
of the foregoing.
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"UNFUNDED PENSION LIABILITY" means, at any time, the aggregate amount,
if any, of the sum of (a) the amount by which the present value of all accrued
benefits under each Title IV Plan exceeds the fair market value of all assets of
such Title IV Plan allocable to such benefits in accordance with Title IV of
ERISA, all determined as of the most recent valuation date for each such Title
IV Plan using the actuarial assumptions for funding purposes in effect under
such Title IV Plan, and (b) for a period of 5 years following a transaction
which might reasonably be expected to be covered by Section 4069 of ERISA, the
liabilities (whether or not accrued) that could be avoided by any Credit Party
or any ERISA Affiliate as a result of such transaction.
"WALDENSIAN" has the meaning ascribed thereto in the recitals to the
Agreement.
"WELFARE PLAN" means a Plan described in Section 3(i) of ERISA.
Rules of construction with respect to accounting terms used in the
Agreement or the other Loan Documents shall be as set forth in ANNEX G. All
other undefined terms contained in any of the Loan Documents shall, unless the
context indicates otherwise, have the meanings provided for by the Code to the
extent the same are used or defined therein; in the event that any term is
defined differently in different Articles or Divisions of the Code, the
definition contained in Article or Division 9 shall control. Unless otherwise
specified, references in the Agreement or any of the Appendices to a Section,
subsection or clause refer to such Section, subsection or clause as contained in
the Agreement. The words "herein," "hereof" and "hereunder" and other words of
similar import refer to the Agreement as a whole, including all Annexes,
Exhibits and Schedules, as the same may from time to time be amended, restated,
modified or supplemented, and not to any particular section, subsection or
clause contained in the Agreement or any such Annex, Exhibit or Schedule.
Wherever from the context it appears appropriate, each term stated in
either the singular or plural shall include the singular and the plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, feminine and neuter genders. The words "including", "includes" and
"include" shall be deemed to be followed by the words "without limitation"; the
word "or" is not exclusive; references to Persons include their respective
successors and assigns (to the extent and only to the extent permitted by the
Loan Documents) or, in the case of governmental Persons, Persons succeeding to
the relevant functions of such Persons; and all references to statutes and
related regulations shall include any amendments of the same and any successor
statutes and regulations. Whenever any provision in any Loan Document refers to
the knowledge (or an analogous phrase) of any Credit Party, such words are
intended to signify that such Credit Party has actual knowledge or awareness of
a particular fact or circumstance or that such Credit Party, if it had exercised
reasonable diligence, would have known or been aware of such fact or
circumstance.
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ANNEX B (SECTION 1.2)
TO
CREDIT AGREEMENT
LETTERS OF CREDIT
(a) ISSUANCE. Subject to the terms and conditions of the Agreement,
Agent and Revolving Lenders agree to incur, from time to time prior to the
Commitment Termination Date, upon the request of Borrower and for Borrower's
account, Letter of Credit Obligations by causing Letters of Credit to be issued
by GE Capital or a Subsidiary thereof or a bank or other legally authorized
Person selected by or acceptable to Agent in its sole discretion (each, an "L/C
ISSUER") for Borrower's account and guaranteed by Agent; PROVIDED, that if the
L/C Issuer is a Revolving Lender, then such Letters of Credit shall not be
guaranteed by Agent but rather each Revolving Lender shall, subject to the terms
and conditions hereinafter set forth, purchase (or be deemed to have purchased)
risk participations in all such Letters of Credit issued with the written
consent of Agent, as more fully described in paragraph (b)(ii) below. The
aggregate amount of all such Letter of Credit Obligations shall not at any time
exceed the least of (i) One Million Dollars ($1,000,000) (the "L/C SUBLIMIT"),
and (ii) the Maximum Amount less the aggregate outstanding principal balance of
the Revolving Credit Advances, and (iii) the Borrowing Base less the aggregate
outstanding principal balance of the Revolving Credit Advances. No such Letter
of Credit shall have an expiry date that is more than one year following the
date of issuance thereof, unless otherwise determined by Agent in its sole
discretion, and neither Agent nor Revolving Lenders shall be under any
obligation to incur Letter of Credit Obligations in respect of, or purchase risk
participations in, any Letter of Credit having an expiry date that is later than
the Commitment Termination Date.
(b) (i) ADVANCES AUTOMATIC; PARTICIPATIONS. In the event that
Agent or any Revolving Lender shall make any payment on or pursuant to any
Letter of Credit Obligation, such payment shall then be deemed automatically to
constitute a Revolving Credit Advance under SECTION 1.1(A) of the Agreement
regardless of whether a Default or Event of Default has occurred and is
continuing and notwithstanding Borrower's failure to satisfy the conditions
precedent set forth in SECTION 2, and each Revolving Lender shall be obligated
to pay its Pro Rata Share thereof in accordance with the Agreement. The failure
of any Revolving Lender to make available to Agent for Agent's own account its
Pro Rata Share of any such Revolving Credit Advance or payment by Agent under or
in respect of a Letter of Credit shall not relieve any other Revolving Lender of
its obligation hereunder to make available to Agent its Pro Rata Share thereof,
but no Revolving Lender shall be responsible for the failure of any other
Revolving Lender to make available such other Revolving Lender's Pro Rata Share
of any such payment.
(ii) If it shall be illegal or unlawful for Borrower to incur
Revolving Credit Advances as contemplated by paragraph (b)(i) above because of
an
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Event of Default described in SECTIONS 8.1(H) OR (I) or otherwise or if it shall
be illegal or unlawful for any Revolving Lender to be deemed to have assumed a
ratable share of the reimbursement obligations owed to an L/C Issuer, or if the
L/C Issuer is a Revolving Lender, then (i) immediately and without further
action whatsoever, each Revolving Lender shall be deemed to have irrevocably and
unconditionally purchased from Agent (or such L/C Issuer, as the case may be) an
undivided interest and participation equal to such Revolving Lender's Pro Rata
Share (based on the Revolving Loan Commitments) of the Letter of Credit
Obligations in respect of all Letters of Credit then outstanding and (ii)
thereafter, immediately upon issuance of any Letter of Credit, each Revolving
Lender shall be deemed to have irrevocably and unconditionally purchased from
Agent (or such L/C Issuer, as the case may be) an undivided interest and
participation in such Revolving Lender's Pro Rata Share (based on the Revolving
Loan Commitments) of the Letter of Credit Obligations with respect to such
Letter of Credit on the date of such issuance. Each Revolving Lender shall fund
its participation in all payments or disbursements made under the Letters of
Credit in the same manner as provided in the Agreement with respect to Revolving
Credit Advances.
(c) CASH COLLATERAL. (i) If Borrower is required to provide cash
collateral for any Letter of Credit Obligations pursuant to the Agreement prior
to the Commitment Termination Date, Borrower will pay to Agent for the ratable
benefit of itself and Revolving Lenders cash or cash equivalents acceptable to
Agent ("CASH EQUIVALENTS") in an amount equal to 105% of the maximum aggregate
amount then available to be drawn under each applicable Letter of Credit
outstanding. Such funds or Cash Equivalents shall be held by Agent in a cash
collateral account (the "CASH COLLATERAL ACCOUNT") maintained at a bank or
financial institution acceptable to Agent. The Cash Collateral Account shall be
in the name of Borrower and shall be pledged to, and subject to the control of,
Agent, for the benefit of Agent and Lenders, in a manner satisfactory to Agent.
Borrower hereby pledges and grants to Agent, on behalf of itself and Lenders, a
security interest in all such funds and Cash Equivalents held in the Cash
Collateral Account from time to time and all proceeds thereof, as security for
the payment of all amounts due in respect of the Letter of Credit Obligations
and other Obligations, whether or not then due. The Agreement, including this
ANNEX B, shall constitute a security agreement under applicable law.
(ii) If any Letter of Credit Obligations, whether or not then
due and payable, shall for any reason be outstanding on the Commitment
Termination Date, Borrower shall either (A) provide cash collateral therefor in
the manner described above, or (B) cause all such Letters of Credit and
guaranties thereof, if any, to be canceled and returned, or (C) deliver a
stand-by letter (or letters) of credit in guarantee of such Letter of Credit
Obligations, which stand-by letter (or letters) of credit shall be of like tenor
and duration (plus 30 additional days) as, and in an amount equal to 105% of the
aggregate maximum amount then available to be drawn under, the Letters of Credit
to which such outstanding Letter of Credit Obligations relate and shall be
issued by a Person, and shall
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be subject to such terms and conditions, as are be satisfactory to Agent in its
sole discretion.
(iii) From time to time after funds are deposited in the Cash
Collateral Account by Borrower, whether before or after the Commitment
Termination Date, Agent may apply such funds or Cash Equivalents then held in
the Cash Collateral Account to the payment of any amounts, and in such order as
Agent may elect, as shall be or shall become due and payable by Borrower to
Agent and Lenders with respect to such Letter of Credit Obligations of Borrower
and, upon the satisfaction in full of all Letter of Credit Obligations of
Borrower, to any other Obligations then due and payable.
(iv) Neither Borrower nor any Person claiming on behalf of or
through Borrower shall have any right to withdraw any of the funds or Cash
Equivalents held in the Cash Collateral Account, except that upon the
termination of all Letter of Credit Obligations and the payment of all amounts
payable by Borrower to Agent and Lenders in respect thereof, any funds remaining
in the Cash Collateral Account shall be applied to other Obligations then due
and owing and upon payment in full of such Obligations, any remaining amount
shall be paid to Borrower or as otherwise required by law. Interest earned on
deposits in the Cash Collateral Account shall be for the account of the
Borrower.
(d) FEES AND EXPENSES. Borrower agrees to pay to Agent for the
benefit of Revolving Lenders, as compensation to such Lenders for Letter of
Credit Obligations incurred hereunder, (i) all costs and expenses incurred by
Agent or any Lender on account of such Letter of Credit Obligations, and (ii)
for each month during which any Letter of Credit Obligation shall remain
outstanding, a fee (the "LETTER OF CREDIT FEE") in an amount equal to the
Applicable Revolver LIBOR Margin multiplied by the maximum amount available from
time to time to be drawn under the applicable Letter of Credit. Such fee shall
be paid to Agent for the benefit of the Revolving Lenders in arrears, on the
first day of each month and on the Commitment Termination Date. In addition,
Borrower shall pay to any L/C Issuer, on demand, such fees (including all per
annum fees), charges and expenses of such L/C Issuer in respect of the issuance,
negotiation, acceptance, amendment, transfer and payment of such Letter of
Credit or otherwise payable pursuant to the application and related
documentation under which such Letter of Credit is issued.
(e) REQUEST FOR INCURRENCE OF LETTER OF CREDIT OBLIGATIONS.
Borrower shall give Agent at least 2 Business Days' prior written notice
requesting the incurrence of any Letter of Credit Obligation. The notice shall
be accompanied by the form of the Letter of Credit (which shall be acceptable to
the L/C Issuer) and a completed Application for Standby Letter of Credit in the
form customarily accepted by such L/C Issuer. Notwithstanding anything contained
herein to the contrary, Letter of Credit applications by Borrower and approvals
by Agent and the L/C Issuer may be made and
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transmitted pursuant to electronic codes and security measures mutually agreed
upon and established by and among Borrower, Agent and the L/C Issuer.
(f) OBLIGATION ABSOLUTE. The obligation of Borrower to reimburse
Agent and Revolving Lenders for payments made with respect to any Letter of
Credit Obligation shall be absolute, unconditional and irrevocable, without
necessity of presentment, demand, protest or other formalities, and the
obligations of each Revolving Lender to make payments to Agent with respect to
Letters of Credit shall be unconditional and irrevocable. Such obligations of
Borrower and Revolving Lenders shall be paid strictly in accordance with the
terms hereof under all circumstances including the following:
(i) any lack of validity or enforceability of any Letter of Credit or the
Agreement or the other Loan Documents or any other agreement;
(ii) the existence of any claim, setoff, defense or other right that
Borrower or any of its Affiliates or any Lender may at any time have against a
beneficiary or any transferee of any Letter of Credit (or any Persons or
entities for whom any such transferee may be acting), Agent, any Lender, or any
other Person, whether in connection with the Agreement, the Letter of Credit,
the transactions contemplated herein or therein or any unrelated transaction
(including any underlying transaction between Borrower or any of its Affiliates
and the beneficiary for which the Letter of Credit was procured);
(iii) any draft, demand, certificate or any other document presented under
any Letter of Credit proving to be forged, fraudulent, invalid or insufficient
in any respect or any statement therein being untrue or inaccurate in any
respect;
(iv) payment by Agent (except as otherwise expressly provided in paragraph
(g)(ii)(C) below) or any L/C Issuer under any Letter of Credit or guaranty
thereof against presentation of a demand, draft or certificate or other document
that does not comply with the terms of such Letter of Credit or such guaranty;
(v) any other circumstance or event whatsoever, that is similar to any of
the foregoing; or
(vi) the fact that a Default or an Event of Default has occurred and is
continuing.
(g) INDEMNIFICATION; NATURE OF LENDERS' DUTIES. (i) In addition to
amounts payable as elsewhere provided in the Agreement, Borrower hereby agrees
to pay and to protect, indemnify, and save harmless Agent, each L/C Issuer and
each Lender from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees and
allocated costs of internal counsel) that Agent or any Lender may incur or be
subject to as a consequence, direct or indirect, of (A) the issuance of any
Letter of Credit or guaranty thereof, or (B) the failure
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of Agent, any L/C Issuer or any Lender seeking indemnification or of any L/C
Issuer to honor a demand for payment under any Letter of Credit or guaranty
thereof as a result of any act or omission, whether rightful or wrongful, of any
present or future de jure or de facto government or Governmental Authority, in
each case other than to the extent solely as a result of the gross negligence or
willful misconduct of Agent, such L/C Issuer or such Lender (as finally
determined by a court of competent jurisdiction).
(ii) As between Agent, any L/C Issuer and any Lender, on the one hand
and Borrower, on the other hand, Borrower assumes all risks of the acts and
omissions of, or misuse of any Letter of Credit by beneficiaries of any Letter
of Credit. In furtherance and not in limitation of the foregoing, to the fullest
extent permitted by law neither Agent nor any L/C Issuer nor any Lender shall be
responsible for: (A) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document issued by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (B) the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, that may prove
to be invalid or ineffective for any reason; (C) failure of the beneficiary of
any Letter of Credit to comply fully with conditions required in order to demand
payment under such Letter of Credit; PROVIDED, that in the case of any payment
by Agent or a L/C Issuer, as applicable, under any Letter of Credit or guaranty
thereof, Agent or such L/C Issuer, as the case may be, shall be liable to the
extent such payment was made solely as a result of its gross negligence or
willful misconduct (as finally determined by a court of competent jurisdiction)
in determining that the demand for payment under such Letter of Credit or
guaranty thereof complies on its face with any applicable requirements for a
demand for payment under such Letter of Credit or guaranty thereof; (D) errors,
omissions, interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they may be in
cipher; (E) errors in interpretation of technical terms; (F) any loss or delay
in the transmission or otherwise of any document required in order to make a
payment under any Letter of Credit or guaranty thereof or of the proceeds
thereof; (G) the credit of the proceeds of any drawing under any Letter of
Credit or guaranty thereof; and (H) any consequences arising from causes beyond
the control of Agent, any L/C Issuer or any Lender. None of the above shall
affect, impair, or prevent the vesting of any of Agent's, any L/C Issuer's or
any Lender's rights or powers hereunder or under the Agreement.
(iii) Nothing contained herein shall be deemed to limit or to expand
any waivers, covenants or indemnities made by Borrower in favor of any L/C
Issuer in any letter of credit application, reimbursement agreement or similar
document, instrument or agreement between Borrower and such L/C Issuer,
including any Master Standby Agreement entered into with Agent.
B-5
ANNEX C (SECTION 1.8)
TO
CREDIT AGREEMENT
CASH MANAGEMENT SYSTEM
Borrower shall, and shall cause its Subsidiaries to, establish and
maintain the Cash Management Systems described below:
(a) On or before the Closing Date and until the Termination Date,
Borrower shall (i) establish blocked accounts ("BLOCKED ACCOUNTS") at one or
more of the banks set forth in DISCLOSURE SCHEDULE (3.19), and (ii) deposit and
cause its Subsidiaries to deposit or cause to be deposited promptly, and in any
event no later than the first Business Day after the date of receipt thereof,
all cash, checks, drafts or other similar items of payment relating to or
constituting payments made in respect of any and all Collateral into one or more
Blocked Accounts in Borrower's name or any such Subsidiary's name and at a bank
identified in DISCLOSURE SCHEDULE (3.19) (each, a "RELATIONSHIP BANK"). On or
before the Closing Date, Borrower shall have established a concentration account
in its name (the "CONCENTRATION ACCOUNT") at the bank that shall be designated
as the Concentration Account bank for Borrower in DISCLOSURE SCHEDULE (3.19)
(the "CONCENTRATION ACCOUNT BANK") which bank shall be reasonably satisfactory
to Agent.
(b) Borrower may maintain, in its name, an account (each a
"DISBURSEMENT ACCOUNT" and collectively, the "DISBURSEMENT ACCOUNTS") at a bank
acceptable to Agent into which Agent shall, from time to time, deposit proceeds
of Revolving Credit Advances made to Borrower pursuant to SECTION 1.1 for use by
Borrower in accordance with the provisions of SECTION 1.4.
(c) On or before the Closing Date (or such later date as Agent shall
consent to in writing), the Concentration Account Bank, each bank where a
Disbursement Account is maintained and all other Relationship Banks, shall have
entered into tri-party blocked account agreements with Agent, for the benefit of
itself and Lenders, and Borrower and Subsidiaries thereof, as applicable, in
form and substance reasonably acceptable to Agent, which shall become operative
on or prior to the Closing Date. Each such blocked account agreement shall
provide, among other things, that (i) all items of payment deposited in such
account and proceeds thereof deposited in the Concentration Account are held by
such bank as agent or bailee-in-possession for Agent, on behalf of itself and
Lenders, (ii) the bank executing such agreement has no rights of setoff or
recoupment or any other claim against such account, as the case may be, other
than for payment of its service fees and other charges directly related to the
administration of such account and for returned checks or other items of
payment, and (iii) from and after the Closing Date (A) with respect to banks at
which a Blocked Account is maintained, such bank agrees, from and after the
receipt of a notice (an "ACTIVATION NOTICE") from Agent (which Activation Notice
may be given by Agent at any time at which (1) a Default or
C-1
Event of Default has occurred and is continuing, (2) Agent reasonably believes
based upon information available to it that a Default or an Event of Default is
likely to occur; (3) Agent reasonably believes that an event or circumstance
that is likely to have a Material Adverse Effect has occurred, or (4) Agent
reasonably has grounds to question the integrity of Borrower's Cash Management
Systems or Borrower's compliance with the provisions of this ANNEX C or any
other provisions of the Loan Documents to the extent related to such Cash
Management Systems (any of the foregoing being referred to herein as an
"ACTIVATION EVENT")), to forward immediately all amounts in each Blocked Account
to the Concentration Account Bank and to commence the process of daily sweeps
from such Blocked Account into the Concentration Account and (B) with respect to
the Concentration Account Bank, such bank agrees from and after the receipt of
an Activation Notice from Agent upon the occurrence of an Activation Event, to
immediately forward all amounts received in the Concentration Account to the
Collection Account through daily sweeps from such Concentration Account into the
Collection Account. From and after the date Agent has delivered an Activation
Notice to any bank with respect to any Blocked Account(s), Borrower shall not,
and shall not cause or permit any Subsidiary thereof to, accumulate or maintain
cash in Disbursement Accounts or payroll accounts as of any date of
determination in excess of checks outstanding against such accounts as of that
date and amounts necessary to meet minimum balance requirements.
(d) So long as no Default or Event of Default has occurred and is
continuing, Borrower may amend DISCLOSURE SCHEDULE (3.19) to add or replace a
Relationship Bank, or Blocked Account or to replace any Concentration Account or
any Disbursement Account; PROVIDED, that (i) Agent shall have consented in
writing in advance to the opening of such account with the relevant bank and
(ii) prior to the time of the opening of such account, Borrower or its
Subsidiaries, as applicable, and such bank shall have executed and delivered to
Agent a tri-party blocked account agreement, in form and substance reasonably
satisfactory to Agent. Borrower shall close any of its accounts (and establish
replacement accounts in accordance with the foregoing sentence) promptly and in
any event within 30 days following notice from Agent that the creditworthiness
of any bank holding an account is no longer acceptable in Agent's reasonable
judgment, or as promptly as practicable and in any event within 60 days
following notice from Agent that the operating performance, funds transfer or
availability procedures or performance with respect to accounts of the bank
holding such accounts or Agent's liability under any tri-party blocked account
agreement with such bank is no longer acceptable in Agent's reasonable judgment.
(e) The Blocked Accounts, Disbursement Accounts and the Concentration
Account shall be cash collateral accounts, with all cash, checks and other
similar items of payment in such accounts securing payment of the Loans and all
other Obligations, and in which Borrower and each Subsidiary thereof shall have
granted a Lien to Agent, on behalf of itself and Lenders, pursuant to the
Security Agreement.
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(f) All amounts deposited in the Collection Account shall be deemed
received by Agent in accordance with SECTION 1.10 and shall be applied (and
allocated) by Agent in accordance with SECTION 1.11. In no event shall any
amount be so applied unless and until such amount shall have been credited in
immediately available funds to the Collection Account.
(g) Borrower shall and shall cause its Affiliates, officers,
employees, agents, directors or other Persons acting for or in concert with
Borrower (each a "RELATED PERSON") to (i) hold in trust for Agent, for the
benefit of itself and Lenders, all checks, cash and other items of payment
received by Borrower or any such Related Person, and (ii) within 1 Business Day
after receipt by Borrower or any such Related Person of any checks, cash or
other items of payment, deposit the same into a Blocked Account. Borrower and
each Related Person thereof acknowledges and agrees that all cash, checks or
other items of payment constituting proceeds of Collateral are part of the
Collateral. All proceeds of the sale or other disposition of any Collateral,
shall be deposited directly into Blocked Accounts.
C-3
ANNEX D (SECTION 2.1(A))
TO
CREDIT AGREEMENT
CLOSING CHECKLIST
In addition to, and not in limitation of, the conditions described in
SECTION 2.1 of the Agreement, pursuant to SECTION 2.1(A), the following items
must be received by Agent in form and substance satisfactory to Agent on or
prior to the Closing Date (each capitalized term used but not otherwise defined
herein shall have the meaning ascribed thereto in ANNEX A to the Agreement):
A. APPENDICES. All Appendices to the Agreement, in form and
substance satisfactory to Agent.
B. REVOLVING NOTES AND TERM NOTES. Duly executed originals of the
Revolving Notes and Term Notes for each applicable Lender, dated the Closing
Date.
C. SECURITY AGREEMENT. Duly executed originals of the Security
Agreement, dated the Closing Date, and all instruments, documents and agreements
executed pursuant thereto, including powers of attorney.
D. INSURANCE. Satisfactory evidence that the insurance policies
required by SECTION 5.4 are in full force and effect, together with appropriate
evidence showing loss payable and/or additional insured clauses or endorsements,
as requested by Agent, in favor of Agent, on behalf of Lenders.
E. SECURITY INTERESTS AND CODE FILINGS. (a) Evidence satisfactory to
Agent that Agent (for the benefit of itself and Lenders) has a valid and
perfected first priority security interest in the Collateral, including (i) such
documents duly executed by each Credit Party (including financing statements
under the Code and other applicable documents under the laws of any jurisdiction
with respect to the perfection of Liens) as Agent may request in order to
perfect its security interests in the Collateral and (ii) copies of Code search
reports listing all effective financing statements that name any Credit Party as
debtor, together with copies of such financing statements, none of which shall
cover the Collateral, except for those relating to the Prior Lender Obligations
(all of which shall be terminated on the Closing Date).
(b) Evidence satisfactory to Agent, including copies, of all UCC-1
and other financing statements filed in favor of any Credit Party with respect
to each location, if any, at which Inventory may be consigned.
(c) Control Letters from (i) all issuers of uncertificated securities
and financial assets held by Borrower, (ii) all securities intermediaries with
respect to all securities accounts and securities entitlements of Borrower, and
(iii) all futures
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commission agents and clearing houses with respect to all commodities contracts
and commodities accounts held by Borrower.
F. PAYOFF LETTER; TERMINATION STATEMENTS. Copies of a duly executed
payoff letter, in form and substance reasonably satisfactory to Agent, by and
between all parties to the Prior Lender loan documents evidencing repayment in
full of all Prior Lender Obligations and the release of all Liens in favor of
Prior Lender or relating to the Prior Lender Obligations together with (a) UCC-3
or other appropriate termination statements, in form and substance satisfactory
to Agent, manually signed by the Prior Lender releasing all liens of Prior
Lender upon any of the personal property of each Credit Party, and (b)
termination of all blocked account agreements, bank agency agreements or other
similar agreements or arrangements or arrangements in favor of Prior Lender or
relating to the Prior Lender Obligations.
G. INTELLECTUAL PROPERTY SECURITY AGREEMENTS. Duly executed
originals of the Intellectual Property Security Agreements, each dated the
Closing Date and signed by each Credit Party which owns Trademarks, Copyrights
and/or Patents, all in form and substance reasonably satisfactory to Agent,
together with all instruments, documents and agreements executed pursuant
thereto.
H. INITIAL BORROWING BASE CERTIFICATE. Duly executed originals of an
initial Borrowing Base Certificate from Borrower, dated the Closing Date,
reflecting information concerning Eligible Accounts and Eligible Inventory of
Borrower as of a date not more than 7 days prior to the Closing Date.
I. INITIAL NOTICE OF REVOLVING CREDIT ADVANCE. Duly executed
originals of a Notice of Revolving Credit Advance, dated the Closing Date, with
respect to the initial Revolving Credit Advance to be requested by Borrower on
the Closing Date.
J. LETTER OF DIRECTION. Duly executed originals of a letter of
direction from Borrower addressed to Agent, on behalf of itself and Lenders,
with respect to the disbursement on the Closing Date of the proceeds of the Term
Loan and the initial Revolving Credit Advance.
K. CASH MANAGEMENT SYSTEM; BLOCKED ACCOUNT AGREEMENTS. Evidence
satisfactory to Agent that, as of the Closing Date, Cash Management Systems
complying with ANNEX C to the Agreement have been established and are currently
being maintained in the manner set forth in such ANNEX C, together with copies
of duly executed tri-party blocked account, reasonably satisfactory to Agent,
with the banks as required by ANNEX C.
L. CHARTER AND GOOD STANDING. For each Credit Party, such Person's
(a) charter and all amendments thereto, (b) good standing certificates
(including verification of tax status) in its state of incorporation and (c)
good standing certificates (including verification of tax status) and
certificates of qualification to conduct business
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in each jurisdiction where its ownership or lease of property or the conduct of
its business requires such qualification, each dated a recent date prior to the
Closing Date and certified by the applicable Secretary of State or other
authorized Governmental Authority.
M. BYLAWS AND RESOLUTIONS. For each Credit Party, (a) such Person's
bylaws, together with all amendments thereto and (b) resolutions of such
Person's Board of Directors or Board of Managers, as applicable and
stockholders, approving and authorizing the execution, delivery and performance
of the Loan Documents and the other Related Transaction Documents to which such
Person is a party and the transactions to be consummated in connection
therewith, each certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being in full force and effect without
any modification or amendment.
N. INCUMBENCY CERTIFICATES. For each Credit Party, signature and
incumbency certificates of the officers of each such Person executing any of the
Loan Documents, certified as of the Closing Date by such Person's corporate
secretary or an assistant secretary as being true, accurate, correct and
complete.
O. OPINIONS OF COUNSEL. Duly executed originals of opinions of Xxxxx
Xxxxxxxxxx, LLP, counsel for the Borrower and Waldensian, together with any
local counsel opinions reasonably requested by Agent, each in form and substance
reasonably satisfactory to Agent and its counsel, dated the Closing Date, and
each accompanied by a letter addressed to such counsel from the Borrower and
Waldensian, authorizing and directing such counsel to address its opinion to
Agent, on behalf of Lenders, and to include in such opinion an express statement
to the effect that Agent and Lenders are authorized to rely on such opinion.
P. PLEDGE AGREEMENTS. Duly executed originals of each of the Pledge
Agreements accompanied by (as applicable) (a) share certificates representing
all of the outstanding Stock being pledged pursuant to such Pledge Agreement and
stock powers for such share certificates executed in blank and (b) the original
Intercompany Notes and other instruments evidencing Indebtedness being pledged
pursuant to such Pledge Agreement, duly endorsed in blank.
Q. ACCOUNTANTS' LETTERS. A letter from the Credit Parties to their
independent auditors authorizing the independent certified public accountants of
the Credit Parties to communicate with Agent and Lenders in accordance with
SECTION 4.2, and a letter from such auditors acknowledging Lenders' reliance on
the auditor's certification of past and future Financial Statements.
R. APPOINTMENT OF AGENT FOR SERVICE. An appointment of CT
Corporation as each Credit Party's agent for service of process.
D-3
S. SOLVENCY CERTIFICATE. The Credit Parties shall deliver to Agent
for the benefit of Lenders a solvency certificate from its chief financial
officer in form and substance reasonably satisfactory to Agent.
T. FEE LETTER. Duly executed originals of the GE Capital Fee Letter.
U. OFFICER'S CERTIFICATE. Agent shall have received duly executed
originals of a certificate of the Chief Executive Officer of Borrower, dated the
Closing Date, stating that, since December 31, 2001 (a) no event or condition
has occurred or is existing which could reasonably be expected to have a
Material Adverse Effect (after giving effect to the transactions contemplated by
the Contribution Agreement and assuming all assets and liabilities of the
Borrower were contributed to it as of such date); (b) there has been no material
adverse change in the industry in which Borrower operates (after giving effect
to the transactions contemplated by the Contribution Agreement and assuming all
assets and liabilities of the Borrower were contributed to it as of such date);
(c) no Litigation has been commenced which, if successful, would have a Material
Adverse Effect or could challenge any of the transactions contemplated by the
Agreement and the other Related Transaction Documents; (d) there has been no
material increase in liabilities, liquidated or contingent, and no material
decrease in assets of Borrower (after giving effect to the transactions
contemplated by the Contribution Agreement and assuming all assets and
liabilities of the Borrower were contributed to it as of such date); and (e) the
representations and warranties of the Borrower in Section 3 are true and correct
in all material respects.
V. WAIVERS. Agent, on behalf of Lenders, shall have received
landlord waivers and consents, bailee letters and mortgagee agreements in form
and substance satisfactory to Agent, in each case as required pursuant to
SECTION 5.9.
W. MORTGAGES. Mortgages covering all of the Real Estate (the
"MORTGAGED PROPERTIES") together with: (a) title insurance policies, current
as-built surveys, zoning letters and certificates of occupancy, in each case
reasonably satisfactory in form and substance to Agent, in its sole discretion;
(b) evidence that counterparts of the Mortgages have been recorded in all places
to the extent necessary or desirable, in the judgment of Agent, to create a
valid and enforceable first priority lien (subject to Permitted Encumbrances) on
each Mortgaged Property in favor of Agent for the benefit of itself and Lenders
(or in favor of such other trustee as may be required or desired under local
law); and (c) an opinion of counsel in each state in which any Mortgaged
Property is located in form and substance and from counsel reasonably
satisfactory to Agent.
X. ENVIRONMENTAL REPORTS. Agent shall have received Phase II
Environmental Site Assessment Reports, consistent with American Society of
Testing and Materials (ASTM) Standard E 1527-94, and applicable state
requirements, on all of the Real Estate, dated no more than 6 months prior to
the Closing Date, prepared by environmental engineers reasonably satisfactory to
Agent, all in form and substance
D-4
reasonably satisfactory to Agent, in its sole discretion; and Agent shall have
further received such environmental review and audit reports, including Phase II
reports, with respect to the Real Estate of any Credit Party as Agent shall have
requested, and Agent shall be satisfied, in its sole discretion, with the
contents of all such environmental reports. Agent shall have received letters
executed by the environmental firms preparing such environmental reports, in
form and substance reasonably satisfactory to Agent, authorizing Agent and
Lenders to rely on such reports.
Y. APPRAISALS. Agent shall have received appraisals as to all
Equipment and as to each parcel of Real Estate owned by the Borrower, together
with reliance letters in favor of Agent and Lenders, all of which shall be in
form and substance reasonably satisfactory to Agent.
Z. AUDITED FINANCIALS; FINANCIAL CONDITION. Agent shall have
received the Financial Statements, Projections and other materials set forth in
SECTION 3.4, certified by Waldensian's Chief Financial Officer, in each case in
form and substance satisfactory to Agent, and Agent shall be satisfied, in its
sole discretion, with all of the foregoing. Agent shall have further received a
certificate of the Chief Executive Officer of Borrower and/or the Chief
Financial Officer of Waldensian, based on such Pro Forma and Projections, to the
effect that (a) Borrower will be Solvent upon the consummation of the
transactions contemplated herein; (b) the Pro Forma fairly presents the
financial condition of Borrower as of the date thereof after giving effect to
the transactions contemplated by the Loan Documents; (c) the Projections are
based upon estimates and assumptions stated therein, all of which Borrower
believes to be reasonable and fair in light of current conditions and current
facts known to Borrower and, as of the Closing Date, reflect Borrower's good
faith and reasonable estimates of its future financial performance and of the
other information projected therein for the period set forth therein; and (d)
containing such other statements with respect to the solvency of Borrower and
matters related thereto as Agent shall request.
AA. ASSIGNMENT OF REPRESENTATIONS, WARRANTIES, COVENANTS, INDEMNITIES
AND RIGHTS. Agent shall have received a duly executed copy of an Assignment of
Representations, Warranties, Covenants, Indemnities and Rights in respect of
Borrower's rights under the Contribution Documents, which assignment shall be
expressly permitted under such Contribution Document or shall have been
consented to by the parties thereto in writing.]
BB. MASTER STANDBY AGREEMENT. A Master Agreement for Standby Letters
of Credit between Borrower and GE Capital.
CC. OTHER DOCUMENTS. Such other certificates, documents and
agreements respecting any Credit Party as Agent may, in its sole discretion,
request.
D-5
ANNEX E (SECTION 4.1(A))
TO
CREDIT AGREEMENT
FINANCIAL STATEMENTS AND PROJECTIONS -- REPORTING
Borrower shall deliver or cause to be delivered to Agent or to Agent
and Lenders, as indicated, the following:
(a) MONTHLY FINANCIALS. To Agent and Lenders, within 30 days after
the end of each Fiscal Month, financial information regarding Borrower and its
Subsidiaries, certified by the Chief Financial Officer of Borrower, consisting
of consolidated and consolidating (i) unaudited balance sheets as of the close
of such Fiscal Month and the related statements of income and cash flows for
that portion of the Fiscal Year ending as of the close of such Fiscal Month;
(ii) unaudited statements of income and cash flows for such Fiscal Month,
setting forth in comparative form the figures for the corresponding period in
the prior year and the figures contained in the Projections for such Fiscal
Year, all prepared in accordance with GAAP (subject to normal year-end
adjustments); and (iii) a summary of the outstanding balance of all Intercompany
Notes as of the last day of that Fiscal Month. Such financial information shall
be accompanied by the certification of the Chief Financial Officer of Borrower
that (i) such financial information presents fairly in accordance with GAAP
(subject to normal year-end adjustments) the financial position and results of
operations of Borrower and its Subsidiaries, on a consolidated and consolidating
basis, in each case as at the end of such Fiscal Month and for that portion of
the Fiscal Year then ended and (ii) any other information presented is true,
correct and complete in all material respects and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default shall have occurred and be continuing, describing the nature thereof and
all efforts undertaken to cure such Default or Event of Default.
(b) QUARTERLY FINANCIALS. To Agent and Lenders, within 45 days after
the end of each Fiscal Quarter, consolidated and consolidating financial
information regarding Borrower and its Subsidiaries, certified by the Chief
Financial Officer of Borrower, including (i) unaudited balance sheets as of the
close of such Fiscal Quarter and the related statements of income and cash flow
for that portion of the Fiscal Year ending as of the close of such Fiscal
Quarter and (ii) unaudited statements of income and cash flows for such Fiscal
Quarter, in each case setting forth in comparative form the figures for the
corresponding period in the prior year and the figures contained in the
Projections for such Fiscal Year, all prepared in accordance with GAAP (subject
to normal year-end adjustments). Such financial information shall be accompanied
by (A) a statement in reasonable detail (each, a "COMPLIANCE CERTIFICATE")
showing the calculations used in determining compliance with each of the
Financial Covenants that is tested on a quarterly basis and (B) the
certification of the Chief Financial Officer of Borrower that (i) such financial
information presents fairly in accordance with GAAP
E-1
(subject to normal year-end adjustments) the financial position, results of
operations and statements of cash flows of Borrower and its Subsidiaries, on
both a consolidated and consolidating basis, as at the end of such Fiscal
Quarter and for that portion of the Fiscal Year then ended, (ii) any other
information presented is true, correct and complete in all material respects and
that there was no Default or Event of Default in existence as of such time or,
if a Default or Event of Default has occurred and is continuing, describing the
nature thereof and all efforts undertaken to cure such Default or Event of
Default. In addition, Borrower shall deliver to Agent and Lenders, within 45
days after the end of each Fiscal Quarter, a management discussion and analysis
that includes a comparison to budget for that Fiscal Quarter and a comparison of
performance for that Fiscal Quarter to the corresponding period in the prior
year.
(c) OPERATING PLAN. To Agent and Lenders, as soon as available, but
not later than 60 days after the end of each Fiscal Year, an annual operating
plan for Borrower, approved by the Board of Directors of Borrower, for the
following Fiscal Year, which (i) includes a statement of all of the material
assumptions on which such plan is based, (ii) includes monthly balance sheets
and a monthly budget for the following year and (iii) integrates sales, gross
profits, operating expenses, operating profit, cash flow projections and
Borrowing Availability projections, all prepared on the same basis and in
similar detail as that on which operating results are reported (and in the case
of cash flow projections, representing management's good faith estimates of
future financial performance based on historical performance), and including
plans for personnel, Capital Expenditures and facilities.
(d) ANNUAL AUDITED FINANCIALS. To Agent and Lenders, within 90 days
after the end of each Fiscal Year, audited Financial Statements for Borrower and
its Subsidiaries on a consolidated and (unaudited) consolidating basis,
consisting of balance sheets and statements of income and retained earnings and
cash flows, setting forth in comparative form in each case the figures for the
previous Fiscal Year, which Financial Statements shall be prepared in accordance
with GAAP and certified without qualification, by an independent certified
public accounting firm of national standing or otherwise acceptable to Agent.
Such Financial Statements shall be accompanied by (i) a statement prepared in
reasonable detail showing the calculations used in determining compliance with
each of the Financial Covenants, (ii) a report from such accounting firm to the
effect that, in connection with their audit examination, nothing has come to
their attention to cause them to believe that a Default or Event of Default has
occurred (or specifying those Defaults and Events of Default that they became
aware of), it being understood that such audit examination extended only to
accounting matters and that no special investigation was made with respect to
the existence of Defaults or Events of Default, (iii) a letter addressed to
Agent, on behalf of itself and Lenders, in form and substance reasonably
satisfactory to Agent and subject to standard qualifications required by
nationally recognized accounting firms, signed by such accounting firm
acknowledging that Agent and Lenders are entitled to rely upon such accounting
firm's certification of such audited Financial Statements, (iv) the annual
letters to such
E-2
accountants in connection with their audit examination detailing contingent
liabilities and material litigation matters, and (v) the certification of the
Chief Executive Officer or Chief Financial Officer of Borrower that all such
Financial Statements present fairly in accordance with GAAP the financial
position, results of operations and statements of cash flows of Borrower and its
Subsidiaries on a consolidated and consolidating basis, as at the end of such
Fiscal Year and for the period then ended, and that there was no Default or
Event of Default in existence as of such time or, if a Default or Event of
Default has occurred and is continuing, describing the nature thereof and all
efforts undertaken to cure such Default or Event of Default.
(e) MANAGEMENT LETTERS. To Agent and Lenders, within 5 Business Days
after receipt thereof by any Credit Party, copies of all management letters,
exception reports or similar letters or reports received by such Credit Party
from its independent certified public accountants.
(f) DEFAULT NOTICES. To Agent and Lenders, as soon as practicable,
and in any event within 5 Business Days after an executive officer of Borrower
has actual knowledge of the existence of any Default, Event of Default or other
event that has had a Material Adverse Effect, telephonic or telecopied notice
specifying the nature of such Default or Event of Default or other event,
including the anticipated effect thereof, which notice, if given telephonically,
shall be promptly confirmed in writing on the next Business Day.
(g) SEC FILINGS AND PRESS RELEASES. To Agent and Lenders, promptly
upon their becoming available, copies of: (i) all Financial Statements, reports,
notices and proxy statements made publicly available by any Credit Party to its
security holders; (ii) all regular and periodic reports and all registration
statements and prospectuses, if any, filed by any Credit Party with any
securities exchange or with the Securities and Exchange Commission or any
governmental or private regulatory authority; and (iii) all press releases and
other statements made available by any Credit Party to the public concerning
material changes or developments in the business of any such Person.
(h) SUBORDINATED INDEBTEDNESS, EQUITY AND CONTRIBUTION DOCUMENTS
NOTICES. To Agent, as soon as practicable, copies of all material written
notices given or received by any Credit Party with respect to any Indebtedness
which is subordinate to the Obligations or Stock of such Person or with respect
to any of the Contribution Documents, and, within 2 Business Days after any
Credit Party obtains knowledge of any matured or unmatured event of default with
respect to any Indebtedness which is subordinate to the Obligations or with
respect to any of the Contribution Documents, notice of such event of default.
(i) SUPPLEMENTAL SCHEDULES. To Agent, supplemental disclosures, if
any, required by SECTION 5.6.
E-3
(j) LITIGATION. To Agent in writing, promptly upon learning thereof,
notice of any Litigation commenced or threatened against any Credit Party that
(i) seeks damages in excess of $100,000, (ii) seeks injunctive relief, (iii) is
asserted or instituted against any Plan, its fiduciaries or its assets or
against any Credit Party or ERISA Affiliate in connection with any Plan, (iv)
alleges criminal misconduct by any Credit Party, (v) alleges the violation of
any law regarding, or seeks remedies in connection with, any Environmental
Liabilities; or (vi) involves any product recall.
(k) INSURANCE NOTICES. To Agent, disclosure of losses or casualties
required by SECTION 5.4.
(l) LEASE DEFAULT NOTICES. To Agent, within 2 Business Days after
receipt thereof, copies of (i) any and all default notices received under or
with respect to any leased location or public warehouse where Collateral is
located, and (ii) such other notices or documents as Agent may reasonably
request.
(m) LEASE AMENDMENTS. To Agent, within 2 Business Days after receipt
thereof, copies of all material amendments to real estate leases.
(n) OTHER DOCUMENTS. To Agent and Lenders, such other financial and
other information respecting any Credit Party's business or financial condition
as Agent or any Lender shall, from time to time, reasonably request.
E-4
ANNEX F (SECTION 4.1(B))
TO
CREDIT AGREEMENT
COLLATERAL REPORTS
Borrower shall deliver or cause to be delivered the following:
(a) To Agent, upon its request, and in any event , so long as any
Revolving Loan is outstanding at any time during any Fiscal Month, no less
frequently than noon New York time 7 Business Days after the end of each Fiscal
Month (together with a copy of all or any part of the following reports
requested by any Lender in writing after the Closing Date), each of the
following reports, each of which shall be prepared by the Borrower as of the
last day of the immediately preceding Fiscal Month or the date 2 days prior to
the date of any such request:
(i) so long as any Revolving Loan is outstanding, a Borrowing Base
Certificate with respect to Borrower, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion;
(ii) with respect to Borrower, a summary of Inventory by location and type
with a supporting perpetual Inventory report, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion; and
(iii) with respect to Borrower, a monthly trial balance showing Accounts
outstanding aged from invoice date as follows: 1 to 15 days, 16 to 30 days, 31
to 60 days and 61 days or more, accompanied by such supporting detail and
documentation as shall be requested by Agent in its reasonable discretion.
(b) To Agent, on a monthly basis or at such more frequent intervals
as Agent may request from time to time (together with a copy of all or any part
of such delivery requested by any Lender in writing after the Closing Date),
collateral reports with respect to Borrower, including all additions and
reductions (cash and non-cash) with respect to Accounts of Borrower, in each
case accompanied by such supporting detail and documentation as shall be
requested by Agent in its reasonable discretion each of which shall be prepared
by the applicable Borrower as of the last day of the immediately preceding month
or the date 2 days prior to the date of any request;
(c) To Agent, at the time of delivery of each of the monthly
Financial Statements delivered pursuant to ANNEX E:
(i) a reconciliation of the most recent Borrowing Base, general
ledger and month-end Inventory reports of Borrower to Borrower's general ledger
and monthly Financial Statements delivered pursuant to such ANNEX E, in each
case accompanied by
F-1
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(ii) a reconciliation of the perpetual inventory by location to
Borrower's most recent Borrowing Base Certificate, general ledger and monthly
Financial Statements delivered pursuant to ANNEX E, in each case accompanied by
such supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(iii) an aging of accounts payable and a reconciliation of that
accounts payable aging to Borrower's general ledger and monthly Financial
Statements delivered pursuant to ANNEX E, in each case accompanied by such
supporting detail and documentation as shall be requested by Agent in its
reasonable discretion;
(iv) a reconciliation of the outstanding Loans as set forth in the
monthly Loan Account statement provided by Agent to Borrower's general ledger
and monthly Financial Statements delivered pursuant to ANNEX E, in each case
accompanied by such supporting detail and documentation as shall be requested by
Agent in its reasonable discretion;
(d) To Agent, at the time of delivery of each of the quarterly
Financial Statements delivered pursuant to ANNEX E, (i) a listing of government
contracts of Borrower subject to the Federal Assignment of Claims Act of 1940;
and (ii) a list of any applications for the registration of any Patent,
Trademark or Copyright filed by any Credit Party with the United States Patent
and Trademark Office, the United States Copyright Office or any similar office
or agency in the prior Fiscal Quarter;
(e) Borrower, at its own expense, shall deliver to Agent the results
of each physical verification, if any, that Borrower or any of its Subsidiaries
may in their discretion have made, or caused any other Person to have made on
their behalf, of all or any portion of their Inventory (and, if a Default or an
Event of Default has occurred and be continuing, Borrower shall, upon the
request of Agent, conduct, and deliver the results of, such physical
verifications as Agent may require);
(f) Borrower, at its own expense, shall deliver to Agent such
appraisals of its assets as Agent may request at any time after the occurrence
and during the continuance of a Default or an Event of Default, such appraisals
to be conducted by an appraiser, and in form and substance reasonably
satisfactory to Agent; and
(g) Such other reports, statements and reconciliations with respect
to the Borrowing Base or Collateral or Obligations of any or all Credit Parties
as Agent shall from time to time request in its reasonable discretion.
F-2
ANNEX G (SECTION 6.10)
TO
CREDIT AGREEMENT
FINANCIAL COVENANTS
Borrower shall not breach or fail to comply with any of the following
financial covenants, each of which shall be calculated in accordance with GAAP
consistently applied:
(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following
periods that exceed in the aggregate the amounts set forth opposite each of such
periods:
Period Maximum Capital
------ ---------------
Expenditures per Period
-----------------------
September 6, 2002 through December 31, 2002 $200,000
September 6, 2002 through March 31, 2003 $400,000
September 6, 2002 through June 30, 2003 $600,000
September 6, 2002 through September 30, 2003 $750,000
September 6, 2002 through December 31, 2003 $950,000
Thereafter $750,000 per fiscal year; provided
that such amount shall be
increased to $1,000,000 per fiscal
year if the Leverage Ratio for the
immediately preceding fiscal year
is less than 1.0x
(b) MINIMUM FIXED CHARGE COVERAGE RATIO. Borrower and its
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter set forth below, a Fixed Charge Coverage Ratio for the 12-month period
then ended of not less than 1.15x or with respect to the Fiscal Quarters ending
on or before June 30, 2003 the period commencing on September 6, 2002, and
ending on the last day of such Fiscal Quarter of not less than 1.15x.
(c) MINIMUM EBITDA. Borrower and its Subsidiaries on a consolidated
basis shall have, at the end of each Fiscal Quarter set forth below, EBITDA for
the 12-month period then ended (or with respect to the Fiscal Quarters ending on
or before June 30, 2003, the period commencing on September 6, 2002 and ending
on the last day of such Fiscal Quarter) of not less than the following:
Period Ebitda
------ ------
December 31, 2002 $1,650,000
March 31, 2003 $3,300,000
G-1
June 30, 2003 $4,950,000
September 30, 2003 $6,750,000
December 31, 2003 $7,000,000
March 31, 2004 $7,000,000
June 30, 2004 $7,250,000
September 30, 2004 $7,250,000
December 31, 2004 $7,500,000
March 31, 2005 $7,500,000
June 30, 2005 $7,500,000
September 30, 2005 $7,750,000
December 31, 2005 $7,750,000
March 31, 2006 $7,750,000
June 30, 2006 $8,000,000
September 30, 2006 $8,000,000
December 31, 2006 $8,000,000
March 31, 2007 $8,000,000
June 30, 2007 $8,000,000
September 30, 2007 $8,000,000
(d) MAXIMUM LEVERAGE RATIO. Borrower and its Subsidiaries on a
consolidated basis shall have, at the end of each Fiscal Quarter set forth
below, a Leverage Ratio as of the last day of such Fiscal Quarter and for the
12-month period then ended (or with respect to the Fiscal Quarters ending on or
before June 30, 2003, the period commencing on September 6, 2002) and ending on
the last day of such Fiscal Quarters of not more than the following:
2.50x for the Fiscal Quarter ending December 31, 2002;
2.50x for the Fiscal Quarter ending March 31, 2003;
2.25x for the Fiscal Quarter ending June 30, 2003;
2.25x for the Fiscal Quarter ending September 30, 2003;
2.25x for the Fiscal Quarter ending December 31, 2003;
2.25x for the Fiscal Quarter ending March 31, 2004;
2.00x for the Fiscal Quarter ending June 30, 2004;
2.00x for the Fiscal Quarter ending September 30, 2004;
2.00x for the Fiscal Quarter ending December 31, 2004;
2.00x for the Fiscal Quarter ending March 31, 2005;
1.75x for the Fiscal Quarter ending June 30, 2005;
1.75x for the Fiscal Quarter ending September 30, 2005; and
1.50x for each Fiscal Quarter ending thereafter.
For purposes of any calculations under this CLAUSE (D) with respect to
period ending on or before June 30, 2003, EBITDA shall be annualized based on 52
weeks for actual weeks elapsed.
G-2
Unless otherwise specifically provided herein, any accounting term
used in the Agreement shall have the meaning customarily given such term in
accordance with GAAP, and all financial computations hereunder shall be computed
in accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other Loan
Document, then Borrower, Agent and Lenders agree to enter into negotiations in
order to amend such provisions of the Agreement so as to equitably reflect such
Accounting Changes with the desired result that the criteria for evaluating
Borrower's and its Subsidiaries' financial condition shall be the same after
such Accounting Changes as if such Accounting Changes had not been made;
PROVIDED, however, that the agreement of Requisite Lenders to any required
amendments of such provisions shall be sufficient to bind all Lenders.
"ACCOUNTING CHANGES" means (i) changes in accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (ii)
changes in accounting principles concurred in by Borrower's certified public
accountants; (iii) purchase accounting adjustments under A.P.B. 16 or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (iv) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If Agent,
Borrower and Requisite Lenders agree upon the required amendments, then after
appropriate amendments have been executed and the underlying Accounting Change
with respect thereto has been implemented, any reference to GAAP contained in
the Agreement or in any other Loan Document shall, only to the extent of such
Accounting Change, refer to GAAP, consistently applied after giving effect to
the implementation of such Accounting Change. If Agent, Borrower and Requisite
Lenders cannot agree upon the required amendments within 30 days following the
date of implementation of any Accounting Change, then all Financial Statements
delivered and all calculations of financial covenants and other standards and
terms in accordance with the Agreement and the other Loan Documents shall be
prepared, delivered and made without regard to the underlying Accounting Change.
For purposes of Section 8.1, a breach of a Financial Covenant contained in this
Annex G shall be deemed to have occurred as of any date of determination by
Agent or as of the last day of any specified measurement period, regardless of
when the Financial Statements reflecting such breach are delivered to Agent.
G-3
ANNEX H (SECTION 1.1(D))
TO
CREDIT AGREEMENT
LENDERS' WIRE TRANSFER INFORMATION
Name: General Electric Capital Corporation
Bank: Bankers Trust Company
Xxx Xxxx, Xxx Xxxx, 00000
ABA #: 000000000
Account #: 00-000-000
Account Name: GECC
Reference: Capital Funding, Inc./AlbaHealth, LLC
H-1
ANNEX I (SECTION 11.10)
TO
CREDIT AGREEMENT
NOTICE ADDRESSES
(A) If to Agent or GE Capital, at
General Electric Capital Corporation
000 Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx XxXxxxx, Account Manager
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxxx, Esq.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
AND
General Electric Capital Corporation
000 Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxxxxxx 00000
Attention: Corporate Counsel-Capital Funding, Inc.
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
(B) If to Borrower, at
AlbaHealth, LLC
000 Xx. Xxxxxxx Xxxxxx X.X.
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxx Xxxxxx
Facsimile: (000) 000-0000
I-1
With copies to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telecopier No.: (000) 000-0000
Telephone No.: (000) 000-0000
and with copies to:
Encompass Group, L.L.C.
000 Xxxxx Xxxxxx
XxXxxxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
I-2
ANNEX J (FROM ANNEX A - COMMITMENTS DEFINITION)
TO
CREDIT AGREEMENT
Lender(s):
General Electric Capital Corporation
Revolving Loan Commitment $ 3,000,000
Term Loan Commitment: $15,000,000
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